The housing market has had to endure a tumultuous journey keeping up with interest rate volatility, revamped credit requirements, and forbearance requests as a result of the COVID-19 pandemic.

The executive order signed by Presiden Biden extended the previous foreclosure moratorium to June 30, 2021, with the goal to relieve homeowners struggling to make housing payments. Similarly, the nationwide hold on evictions for eligible tenants has also been extended to cover the same period, previously set to sunset in early September of 2020.

Despite the benefits the new extension provides to consumers, multifamily servicers and many industry leaders are concerned with how the orders will continue to distress the rental housing industry.

The Good, The Bad, and The Ugly

One of the silver linings that may indicate success in efforts to provide financial relief to homeowners and renters is that the number of mortgage loans currently in forbearance seems to be trending downward.

The latest data from the Mortgage Bankers Association (MBA) in February found that roughly 2.6 million homeowners were on a forbearance plan of some kind. This number shows a decrease in the number of distressed loans for the third week in a row.

This indicates a recovering economy, albeit slowly, as well as shines light on the fact that both renters and homeowners may now be in a better position to make good on their housing payments.

The new Biden Administration has also looked to increase its relief efforts by proposing an aid package of roughly $25 billion for direct rental relief to struggling landlords.

However, the question that multifamily servicers ask is if the package is enough to carry the industry through June and beyond, especially if moratoriums are again extended while existing assistance resources dissipate.

Some of these resources have also come with their own complications. For example, landlords who have taken hardship forbearance for their multifamily properties secured by Freddie Mac or Fannie Mae loans cannot evict renters for not paying rent while the landlord is receiving forbearance. This stipulation holds true even if the renter is not experiencing a financial hardship. Landlords receiving forbearance also cannot require any back rent to be repaid in one lump sum or charge late fees or other penalties for late payments.

More Solutions Are Needed

At the end of 2020, the Consumer Financial Protection Bureau (CFPB) found that roughly 8.8 million renters and 2 million homeowners were behind on their housing payments, putting an estimated 11 million families at risk of eviction.

But despite the state of the housing industry at the end of 2020, new data from the National Multifamily Housing Council notes that just over 80% of U.S. households have made their rent payments as of March 6, 2021⁵. Foreclosure rates have also declined.

Government relief is working for consumers, but further rental assistance for landlords will be needed if another extension to the eviction and foreclosure moratoriums occurs. Landlords and servicers are already struggling to keep their heads above water.

There is also the need for a solution to address back rents owed to landlords.

Alternatives to Eviction

Many landlords have negotiated payment plans with their tenants to avoid future litigation or damage to the tenant’s credit. Similarly, landlords have assisted tenants who have lost their jobs with accessing unemployment help as well as other benefits.

Ultimately, the market may need to adopt industry-wide plans for renters to pay back rent and make landlords whole. One proposal by the Zillow Group is to amortize back rent into ongoing rent payments over one or two years with a built-in modest interest rate. The proposal would allow landlords to recoup owed back rent while keeping costs manageable for tenants.

With signs pointing toward recovery from the immediate impacts of the pandemic, the rental industry now needs guidance and support to avoid backsliding as it experiences the long-term effects of eviction and foreclosure moratoriums.