Joe Biden Would Give Homeowners, Renters This Big Break If Elected

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Presidential contender Joe Biden supports mortgage and rent forgiveness for Americans who are suffering financially as a result of the coronavirus-driven crisis. That would mean those who lost jobs during the pandemic wouldn’t have to repay their missed housing payments.

“There should be rent forgiveness and there should be mortgage forgiveness now in the middle of this crisis,” the former vice president said on Wednesday on the Snapchat show “Good Luck America.”

“Forgiveness,” he continued. “Not paid later, forgiveness. It’s critically important to people who are in the lower-income strata.”

The Democrat’s proposal could be a potential lifeline for struggling homeowners and renters. But it could also hurt smaller landlords who rely on rental income and ultimately result in higher taxes for everyone, say opponents of the idea.

“This is simply a pandering move on the Biden camp’s part to attract left-leaning supporters,” says Ken Johnson, a real estate economist at Florida Atlantic University in Boca Raton. He thinks this plan is likely too far to the left to pass Congress, no matter who’s in charge.

Before COVID-19 roiled the U.S. economy, Biden released a $640 billion housing plan in February to help low-income renters and middle-class home buyers.

If elected, he planned to provide tax credits of up to $15,000 for first-time home buyers, provide down payment assistance for public and national service workers (e.g., teachers and first respondents), and increase the number of Section 8 rental vouchers for the lowest-income Americans. Biden also intended to provide renters with a tax credit so the poorest among them would pay only up to 30% of their income on rent and utilities.

Progressive Democratic Rep. Ilhan Omar, of Minnesota, introduced a bill last month that would also cancel rent and mortgage payments for the duration of the public health crisis. Landlords and lenders would be eligible for compensation, but only if they agreed to renter protections for five years. However, it appears unlikely to become law.

“Rent forgiveness seems like a Robin Hood–type story: Rob from the rich to give to the poor,” says Johnson. But he points out that many landlords own only a property or two, and depend on the rents they earn to make their own ends meet. “The taking could be from your next-door neighbor.”

The only way Johnson could see it working is if the government pays the landlords what they’re owed—without any special conditions. However, that’s likely to result in higher taxes to pay off those leases.

“The rents pay the mortgage, they pay the insurance, they pay the taxes, they pay the salaries of the maintenance people, the leasing people,” says Cincinnati landlord Charles Tassell, who owns nearly 120 rental units in the city. Tassell is also the chief operating officer of the National Real Estate Investors Association. “Just saying there’s a forgiveness means the taxes aren’t paid, the mortgage isn’t paid, and more people become unemployed.”

Many mortgage lenders would also prefer to offer mortgage forbearance and deferment rather than forgiveness. With these options, missed loan payments can be tacked on to the end of home loans.

“If you defer the payments to the end of the mortgage, everybody’s made whole,” says Tucson, AZ–based mortgage lender Rocke Andrews. He is also the president of the National Association of Mortgage Brokers, a trade group.

The Federal Housing Finance Agency announced on Thursday that it will extend its moratorium on foreclosures and evictions until June 30. This means that banks can’t kick out homeowners and landlords can’t kick out renters who can’t make their monthly housing payments.

However, these protections apply only to homeowners of single-family houses and landlords with buildings with five or more units with Fannie Mae– and Freddie Mac–backed loans. The moratorium had previously been slated to expire on May 17.

Fannie- and Freddie-backed loans make up about half of all residential mortgages, or roughly 28 million borrowers.

In addition, these borrowers in forbearance will be able to hold off on repaying their missed mortgage bills until their homes are refinanced or sold, or at the end of the loan. 

“During this national health emergency, no one should be forced from their home,” FHFA Director Mark Calabria said in a statement.

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