New York homeowners facing foreclosure due to pandemic could be eligible for aid
Federal funding is on the way to New York homeowners who are at risk of foreclosure.
Households behind on their mortgages, property taxes and other housing expenses can get up to $50,000 in aid through the state’s recently-approved Homeowners Assistance Fund.
New York received just under $540 million for homeowners in the American Rescue Plan Act. In a statement last week, Gov. Kathy Hochul said the U.S. Treasury approved the state’s implementation plan for the fund.
Per the Treasury’s guidance, households must have experienced a financial hardship caused by the pandemic and earn at or below 150% of the area median income.
Hochul said the state would soon unveil an outreach campaign targeted at homeowners at risk of foreclosure, to prepare them to apply. She did not say when applications would become available.
Legal aid organizations have been preparing for months to help households through that process.
“I think everyone generally thinks $540 million will not be enough in cash assistance for homeowners,” said Kirsten Keefe, a senior attorney at the Empire Justice Center.
Worse than the Great Recession
Throughout the pandemic, Keefe has been tracking how many households were at risk of foreclosure with data from the U.S. Census Bureau Household Pulse Survey. It measures the pandemic’s social and economic effects across several factors, including mortgage payment status.
While the data varies between reports, Keefe said that on average, between 400,000 to 500,000 New York homeowners say they are not caught up on their mortgage payments.
“The average for each time period is about 10% delinquency rate,” Keefe said.
From Sept. 29 to Oct. 11, the delinquency rate among homeowners topped 13%. The rate was higher among Black and Latinx homeowners. Both groups have been disproportionately affected by the COVID-19 pandemic, in terms of greater health risk and the widening racial wealth gap.
At 35%, Black homeowners were late on their mortgage payments at a rate five times that of white homeowners, who had a delinquency rate around 7% during the aforementioned two-week period. Sixteen percent of Latinx and 2% of Asian homeowners reported falling behind.
Historically, the delinquency rate in New York peaked in January 2012, when 8.3% of mortgage payments were more than 30 days past due, including those that were 90 or more days late.
New York saw delinquencies between 30-89 days reach a high in January 2009 at 3.8%, in step with the nationwide recession.
“Obviously they were using different data back then and different methodology, potentially, than today, but I think it’s suffice to say that the delinquency rate is much higher today than it was when we thought it was really awful in 2009, following the subprime mortgage lending crisis and Great Recession,” Keefe continued.
Because of that, Keefe and other legal services attorneys worry the need for homeowner assistance far outpaces the funds available.
Funding in use
The state’s aid program, once awarded, can then be used toward mortgage payments, interest, taxes, insurance, homeowners association dues and other housing costs, according to a presentation on the state’s draft plan from June.
Homeowners may also use the money to modify their mortgage so they can more easily keep up with payments.
That’s where the housing counselors and legal aid attorneys come in, said Betsy Wohl, an attorney at Legal Assistance of Western New York in Ithaca.
“That money can work on its own or it can work in conjunction with a modification, and that’s where the housing counselors and the legal services attorneys can be of great help in negotiating that process,” Wohl said.
Distributing the funds to banks and other lenders, Wohl said, will be a bit like a jigsaw puzzle.
Homeowners with a financial hardship declaration are currently protected under foreclosure moratorium, although it is set to expire on Jan. 15.