I have been fielding questions from several housing groups who are trying to understand the implications of the current situation on their local area. As we all know, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law on March 27, 2020, and contains provisions to allow borrowers with federally backed mortgages to request temporary loan forbearance for up to 180 days. In addition, the borrowers have the right to apply for an extension of another 180 days of forbearance.
Although many consider the Home Mortgage Disclosure Act (HMDA) dated, it does give us the ability to determine the percentage of home loans that are federally backed over time. Nationwide, federally backed mortgages comprise about 50% of the market, Therefore, we can easily see that the CARES Act provides mortgage assistance to half of the mortgage market nationwide. The real question is what happens to the other half of the mortgage market with no protections in place?
As an example, using LendingPatterns™, I looked at results for Los Angeles County, CA. Of the total originations in 2019, we know for sure that the FHA, VA, and FSA/RHS loans are covered by the CARES Act. I also isolated the Conventional originations and looked at the non-GSE investors and calculated that approximately 57% of the mortgage market in Los Angeles County, CA, is ineligible for protections. Of course, Los Angeles County is a high cost area and may not be a true representative area for the country. I expect the percentage of eligible federally insured loans to be higher in most parts of the country.
Regardless of the exact percentage of non-federally backed mortgages, we do know that these numbers represent real people that may not have protections under the CARES Act. Many non-profits are trying to understand the impact in their local area. Contact us at email@example.com if you’d like more information about your local area. Also, look for our follow-up blog coming next week that dives into the numbers over time and across regions.