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Borrowers of color are over-represented among the low- and moderate-income Massachusetts borrowers racking up missed and late payments.
Middle- and working-class homeowners across Massachusetts are taking it on the chin as the pandemic wipes out jobs across the service sector, from restaurants and retail stores to Uber and Lyft and the gig economy, new statistics show.
Two state programs that funnel hundreds of millions of dollars in mortgages each year to low- and moderate-income buyers and homeowners across the Bay State are seeing a sharp rise in missed and late payments.
MassHousing has seen delinquent loans jump to nearly 9 percent of its portfolio since the pandemic hit in full-force in mid-March, triggering lockdown measures and the worst downturn since the Great Depression.
That’s more than double the rate of troubled loans before the crisis.
Meanwhile, the Massachusetts Housing Partnership’s One Mortgage program, which helps channel tens of millions of dollars more in affordable mortgages to buyers each year, has also seen a sharp increase in delinquent loans as well.
Borrowers of Color Hurt Most
While the 2008 downturn developed slowly, “with COVID-19 it hit in the face immediately,” said Mounzer Alylouche, vice president of homeownership programs at MassHousing, the state’s housing finance authority. “In 2008, we did have a real estate crash. Today, it is a societal crisis where the wheels stopped, and while the wheels stopped, unfortunately a lot of people lost their jobs and could not pay their mortgages.”
Payments on more than $360 million in mortgages serviced by MassHousing were 30 days overdue or longer as of June 30, the housing authority recently stated in an update to investors.
That represents 1,763 loans and is more than double the 3.63 percent delinquency rate MassHousing during the same period in 2019.
The sharp increase in mortgages headed south at the state’s two big affordable lending players, in turn, reflects an uncomfortable truth about the coronavirus crisis and the economic damage it has spawned.
While it’s been a tough time for everyone, the crisis has been particularly hard for working–class families and many middle-class folks of more modest means.
These are the people who man the front lines of our service sector, staffing the retail stores, keeping the restaurants humming, stocking the grocery stores and ferrying passengers across town for Uber and Lyft. They don’t have the relative luxury of working from home.
Before the pandemic, many service-sector workers held down two or three gigs at once to make ends meet, and now many of those jobs have simply vanished, swallowed up by the social-distancing measures needed to keep the deadly virus at bay.
“Borrowers who relied on an additional part-time job as an Uber driver or bar tender to complement their income, they have been hurt,” Alylouche said.
There is also a tragic, demographic twist to it all as well.
Many of those working- and middle-class families hit by the collapse of the service sector also hail from minority groups that make up a disproportionate share of front-line workers.
At the One Mortgage program, which has seen troubled loans rise to the 5-7 percent range, people of color make up roughly half the borrowers, noted Elliot Schmiedl, homeownership director at the Massachusetts Housing Partnership.
Reasons for Hope?
Still, there are some glimmers of hope.
Both Alylouche at MassHousing and the MHP’s Schmiedl have seen a slowdown in the number of mortgages going bad, with some distressed homeowners even managing to begin making payments again.
While MassHousing fielded more than 1,542 forbearance requests from homeowners in the months after the coronavirus crisis erupted in March, the number of loans in forbearance had dropped to 1,375 by the end of June.
Homeowners with mortgages serviced by MassHousing also have benefited from a mortgage insurance program, which provides six months of loan payments for borrowers who lose their jobs.
And demand for mortgages from homebuyers, while down from last year, has not fallen off a cliff either.
In fact, the volume of mortgages issued through MassHousing is higher through the first six months of this year than it was during the same period in 2018, a relatively healthy year.
Yet it’s hardly all smooth sailing ahead, either, with many question marks on the road ahead.
For example, what if the restaurant and retail sectors are unable to bring back many of the workers they temporarily let go this spring, especially if there is a second round of the virus here in Massachusetts come fall?
And what if Congress fails to extend that extra $600 a week in unemployment benefits, set to expire in a matter of weeks?
Scott Van Voorhis
Or what if some of the MassHousing borrowers unable to pay their mortgages today are still jobless six months from now, when their mortgage insurance coverage runs out?
“Loan delinquency–wise, I think we have an interesting couple months ahead of us,” Schmiedl said. “If folks don’t have their jobs back, they are not going to be able to start paying those loans back.”
A lot can happen in six months, so we will just have to wait and see.
Here’s hoping the spike in delinquent mortgages is a crisis that has already peaked, and not a sign of even more trouble ahead.
Scott Van Voorhis is Banker & Tradesman’s columnist; opinions expressed are his own. He may be reached at sbvanvoorhis@hotmail.com.
