Report: CARES Act expiration could mean financial meltdown in Louisiana
12th October 2020 · 0 Comments
By Ryan Whirty
Contributing Writer
As the country begins the home stretch of the troubled year of 2020, housing advocates are expressing alarm about the possibility of a mortgage foreclosure crisis that they fear could equal or even surpass the financial and economic disaster of 2008.
In a new report prepared by Urban Footprint titled, “Homeowners on the Edge: Is America on the Brink of a Foreclosure Crisis,” researchers warn that the expiration in January of the federal COVID-19 pandemic economic relief, called the CARES Act, could trigger a financial meltdown across Louisiana.
According to the study, an infusion of $140 million per month will be needed to stabilize the situation and head of what housing officials say is a looming mortgage catastrophe in the state. The report revealed that, largely as a result of the pandemic quarantine, 10 percent of homeowners in Louisiana were unable to pay their mortgages in August, including more than 21,000 in Greater New Orleans alone.
By comparison, the 2008 foreclosure crisis saw five percent of U.S. homeowners lose their homes. With a region in southern Louisiana that’s still dealing with the lingering economic effects of Hurricane Katrina and other storms, the factors are adding up, and the writing on the wall isn’t good. And unless homeowners can get assistance from their elected leaders, thousands of struggling people and families – especially in working-class communities and communities of color – could be out on the streets very soon.
“The estimates suggest that 10 percent of homeowners are vulnerable in Louisiana so unless something is done, this will be worse than the 2008 foreclosure crisis,” said Andreanecia Morris, executive director of HousingNOLA. “The implications are staggering, when you think about the victims of Hurricane Katrina who returned and were able to buy being at risk because of COVID and the fact that recovery from the national foreclosure crisis was inequitable.”
What’s more, Morris said, the fallout from massive loss of homeownership could then devastate public coffers.
“Municipal and parish governments will have to deal with the loss of revenue and the displacement from this kind of catastrophe,” she said.
She added that government leaders at all levels have failed American, and Louisiana, homeowners because their weak, unprepared responses to the coronavirus pandemic crisis have been woefully inadequate.
“In simple terms, our leaders have failed us,” Morris added in comments to The Louisiana Weekly. “Federal COVID funding did not include enough funding to guarantee housing – despite the clear and straightforward connection between safe housing and battling the pandemic. State and local leaders, have squandered the resources allocated and only grudgingly invested in rental housing with decidedly mixed results.”
A few particular populations in Louisiana could be particularly at risk. According to the recent report, more than 50 percent of those unable to meet their monthly mortgages have a household income below $50,000 a year. In addition, 14 percent of non-white communities in Louisiana have a mortgage non-payment rate, compared to the percent found in white communities.
And it’s not just the New Orleans area that’s dangerously vulnerable to a foreclosure crisis. According to HousingLOUISIANA, homeowners in Baton Rouge, Lafayette and on the Northshore are about $20 million behind in their mortgage payments in each metro area, totalling more than $60 million when combined.
Kentrell Jones, HousingLOUI-SIANA Northshore board member and executive director and CEO of East St. Tammany Habitat for Humanity, noted that even prior to the onset of the COVID-19 crisis, roughly one in six households in Louisiana were spending at least half of their income on housing, “leaving little or no margin for lost income or unexpected health care costs.
“Now,” Jones added, “with hundreds of thousands of individuals having filed for unemployment since March, the situation is likely much worse. Louisianans are facing additional economic hardship from lost wages or layoffs and are now confronted with impossible choices between trying to pay their rent or mortgage and life’s other essentials, putting them at risk of foreclosure and eviction.”
All in all, Louisiana households are facing increasingly desperate times, Jones told The Louisiana Weekly.
“The COVID-19 pandemic continues to impact communities around the country and has caused both a public health crisis and an economic crisis,” he said. “Now, we are facing a housing emergency, with devastating economic and social consequences.”
As a result, representatives from HousingNOLA and HousingLOUISIANA – along with partner housing advocacy groups like Enterprise, the National Community Reinvestment Coalition, and the New Orleans Redevelopment Authority – are calling on elected officials and other community leaders to take several steps toward heading off the foreboding mortgage foreclosure situation and help Louisiana homeowners.
The recommendations include examining if soft second mortgages can help vulnerable households refinance their mortgages; use leftover monies from the post-Katrina Road Home Assistance fund to establish assistance coffers; enact policies at the federal level that prevent the predatory banking industry from abandoning struggling homeowners; look into state policy changes in the areas of insurance, property taxes and utility costs to help homeowners; and demand that Congress hammer out further economic and financial relief bills.
“The number of families struggling to make ends meet is only growing because of the COVID-19 pandemic,” Jones said, adding that the organizations he helps lead are doing all they can to help.
“That’s why it’s critical that housing advocates work together to call on candidates and voters to prioritize making the ‘CostOfHome’ affordable. Through Habitat for Humanity International Cost of Home advocacy initiative, East St. Tammany Habitat for Humanity supports national, state and local policies that provide relief to homeowners, renters and nonprofits impacted by the COVID-19 pandemic through support for bills which would boost foreclosure prevention,” Jones said.
This article originally published in the October 12, 2020 print edition of The Louisiana Weekly newspaper.
