Cares Act Post Forbearance Options Acts and Home Loan Modification Options

WHEREAS, according to the 2021 State of Housing in Black America (SHIBA) report Black Americans have lost half of their wealth since the beginning of the 2007 recession through falling homeownership rates and loss of jobs; and

WHEREAS, in January 2021, more than 2.7 million households were in mortgage forbearance plans. A forbearance is when the mortgage servicer or lender allows you to pause or reduce your mortgage payments for a limited time while you build back your finances. Oftentimes, Blacks do not receive the same assistance as other ethnicities and are hit the worst of a crisis after the crisis supposedly over; and

WHEREAS, in 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act stated that any eligible borrower qualified for Forbearance or deferment is not subject to adverse credit reporting; and

WHEREAS, if you were in good standing with your home mortgage loan prior to when forbearance or deferment was awarded, the borrower would stay in good standing for its duration, however, Black homeowners were not afforded the same opportunities by financial institutions; and

WHEREAS, under the CARES Act a loan in forbearance must be reported as current on credit reports. It also made it possible for credit reporting agencies to put in place tools to enable lenders to report consumers' accounts in forbearance or deferment using a special disaster code that indicates the account has been affected by a declared disaster. This means that no new negative information will be reported, and the status will remain until the lender requires payments to resume. Some institutions did not utilize this tool for assistance to Black homeowners; and

WHEREAS, borrowers with longer forbearance periods may find it difficult or impossible to reinstate the loan when the forbearance ends causing additional economic wealth loss in the Black community: and

WHEREAS, HUD Housing Counseling Agencies provide education to assist black homeowners with navigating post homeownership challenges a loan modification is an option to retain homeownership. It allows the borrower to modify the terms of the mortgage loan to reach an affordable payment solution for the borrower; and

WHEREAS, if the loan is modified the long-term credit impact is typically negative for Black homeowners versus positive for white homeowners, depending on how the lender reports it to the credit bureaus. If it shows up as not fulfilling the original terms of the loan, this will have a negative effect on a borrowers' credit.

THEREFORE, BE IT RESOLVED, NAACP urges the Federal Housing Finance Agency (FHFA), the U.S. Department of Housing and Urban Development (HUD), and Congress to initiate policies and legislation to mandate that lenders report loan modifications to credit reporting agencies indicating that those accounts are current.

BE IT FINALLY RESOLVED, that the NAACP and all of its units advocate for homeownership counseling via HUD-approved counseling agencies, as well as advocate for legislative policies which prevent additional economic disaster and loss of Black wealth.