Rep. Denny Heck Leads Letter to Federal Agencies to Stabilize the Mortgage Market During COVID-19 Crisis
WASHINGTON, D.C. – Today, Congressman Denny Heck (WA-10) sent a letter to the federal financial housing agencies asking them to take steps to stabilize and simplify the mortgage market during the COVID-19 crisis.
“One of the enduring lessons of the Great Recession is how destructive the dysfunction in the home mortgage market can be to the broader economy,” said Heck. “We cannot afford to repeat the mistakes we made in 2008. Right now, Americans are facing job loss, struggling with child care, and dealing with other unprecedented financial burdens stemming from COVID-19 – and many are finding themselves unable to make their mortgage payment during this crisis. Not only do we have to get meaningful help to them as soon as we possibly can, but we must stabilize the mortgage market to ensure those hit hardest can weather this crisis.”
The 2008 recession was initiated by poor underwriting and lending practices, but it was exacerbated by widespread problems, including bankruptcies of the companies responsible for collecting payments each month from borrowers and passing those payments along to the loan’s owner. These companies, called third-party mortgage servicers, were overwhelmed by the housing crisis. Payments, modification documents, and even the mortgages themselves were often lost, and the result was thousands or even millions of unnecessary foreclosures, even after Congress put in place homeowner assistance programs.
Congress proactively included in the Coronavirus Aid, Relief, and Economic Security (CARES) Act a provision allowing homeowners with a federally backed mortgage who are suffering economically to delay mortgage payments for up to twelve months -- but problems in the mortgage servicing market could undermine Congress’s intent. Whenever a borrower does not make payments, the mortgage servicer must advance the payment out of its own funds. If millions of Americans use the forbearance period allowed in the CARES Act, mortgage servicers will run out of money quickly, resulting in a cascade of problems repeated from the last recession.
To avoid this, Rep. Heck led a letter to the federal financial and housing agencies asking them to take three steps to stabilize and simplify the mortgage market during the COVID-19 pandemic:
- create a liquidity facility that mortgage servicers can borrow from in order to fund advanced payments;
- standardize modification options at the end of the CARES Act forbearance period; and
- extend the forbearance and modification options to all homeowners.
Full text of the letter can be accessed here.
Rep. Heck was joined on the letter by Rep. Jim Himes (CT-04), Rep. Ben McAdams (UT-04), Rep. Juan Vargas (CA-51), Rep. Bill Foster (IL-14), Rep. Josh Gottheimer (NJ-05), Rep. Ed Perlmutter (CO-07), Rep. Jennifer Wexton (VA-10), Rep. Cindy Axne (IA-03), Rep. David Scott (GA-13), Rep. Gregory Meeks (NY-06), Rep. Al Lawson (FL-05), Rep. Derek Kilmer (WA-06), Rep. Scott Peters (CA-52), Rep. Adam Smith (WA-09), Rep. Kim Schrier (WA-08), Rep. Suzan DelBene (WA-01), Rep. Rick Larsen (WA-02), Rep. Vicente Gonzalez (TX-15), Rep. Madeleine Dean (PA-04), Rep. Stephanie Murphy (FL-07), Rep. Norma Torres (CA-35), Rep. Sean Casten (IL-06), and Rep. Charlie Crist (FL-13).
The letter was signed by all members of the New Democrat Coalition’s (NDC) Housing Task Force, as well as every NDC member on the House Financial Services Committee. Congressman Heck co-chairs the NDC Housing Task Force, which released the report Missing Millions of Homes in the summer of 2018. Since then, Rep. Heck has been fighting for legislation to alleviate the national housing crisis and increase affordability. In the past year he has introduced:
- H.R. 4351 – Yes In My Backyard Act
- H.R. 4029 – Tribal Access to Homeless Assistance Act
- H.R. 5319 – reauthorization of the Native American Housing Assistance and Self-Determination Act
- H.R. 5599 – Fulfilling the Promise of the Housing Trust Fund Act
- H.R. 6314 – Emergency Rental Assistance Act
Rep. Heck has also cosponsored the Build More Housing Near Transit Act (H.R. 4307) and the Veteran HOUSE Act (H.R. 2398), both introduced by Rep. Scott Peters (CA-52).