During the COVID pandemic, millions of renters have had difficulty paying their rent. That’s why the federal government passed an eviction moratorium that made it difficult for landlords to toss out their tenants. The eviction moratorium was extended several times by the Trump and Biden administrations. On August 3, the CDC extended the eviction moratorium that lapsed in July 2021. However, the new eviction moratorium was overturned by the US Supreme Court. As of September 2021, landlords can evict tenants again.  How is this policy affecting the mortgage industry today? Please continue reading to find out more.  Many Americans May Be Evicted in 2021 and 2022

The US economy is slowly recovering from the pandemic and lockdowns, but many renters are month behinds on their payments. It’s estimated that about 7.3 million renters are behind on payments, and about three million families say they may be evicted soon.

Many landlords want to work with their tenants as much as possible. But at the end of the day, most landlords have mortgages and need to get payment from renters. Some landlords are working with struggling renters because evicting tenants costs time and money. It also takes weeks or even months to fill a vacancy with a new tenant.

Some landlords are setting up a repayment plan with tenants instead of evicting them, and the property owners are tightening their financial belts so they can continue to pay their mortgages. After all, paying mortgages late on rental properties will damage their credit and their ability to buy more properties.

Landlords Trying to Survive

While the media often focuses on the challenges renters face, there’s not doubt that landlords with mortgages have been facing their own problems. National statistics show that about 25% of landlords plan to sell at least one of their single-family homes soon because of the rent moratorium.

The numbers suggest that many property owners have struggled to keep their payments on time as they have sent their rent income drop. Also, the booming real estate market has led to significant increases in prices, and this is tempting some rental property owners to sell their homes and take the equity.

This may turn out to be a lucky break for some property owners because they can still sell their rental properties at a considerable profit and get away from non-paying renters.

Rental Property Supply Dropping

Because the rent moratoria have gone on for almost 18 months, some landlords have decided to sell their properties and this has led to a tightening supply of rental properties. The lack of housing stock across the US is increasing competition among home buyers and is driving prices to record highs in many areas of the US.

Some of the homes that are being sold were occupied by tenants that were evicted. If they are sold, they may be bought by people who plan to live in them. This could lead to a supply shortage of rental properties, which is bad for renters, but possibly a benefit for landlords.

How Moratorium Affects Mortgage Industry

Some experts claim that the best way to deal with back rent and landlords unable to pay their mortgages is a government-backed loan program designed for this unique COVID situation. Most likely, the new mortgage program would need to be federal because the size of the problem during COVID amounts to tens of billions of dollars in unpaid rents and mortgages across the US.

The new program, these experts contend, would need to provide landlords with a guarantee of being paid their due back rent so the country’s rental market will return to normal. The loan program, if enacted, would solve several problems simultaneously.

This program would offer details on how renters and landlords could qualify for loans. It could be similar to how people get help for rent assistance today. There also would need to be federal funding for paying back rent. Many tenants may not need to pay anything because they get rental assistance. But some may need to pay some of their back rent depending on their income.  Also, landlords would be assured of 80% to 100% of the back rent they are owed. This would help landlords to pay their mortgages so that they can keep their rental properties and even refinance in some cases. Judges in some areas may require landlords to choose this path instead of evicting tenants for not paying rent.

At this time, only California has been considering this type of plan, and it hasn’t come to a legislative vote yet. One of the problems with the proposed plan was that landlords would only get their back rent in tax credits over a decade, which was too slow for many of them. Also, some hoped that rental assistance from Washington DC would make actions at the state level unnecessary, but it hasn’t been enough to get renters out of all their back rent obligations.

If Congress authorizes a plan like this, it would give landlords up to 80% of the rent they are due right away, and they may even get all the money owed. Also, tenants could avoid eviction and know that their back rent could be paid back over a decade with a payment plan they can afford.

This program would help renters pay back what they owe and avoid eviction, and also help landlords keep their properties and be able to afford more rental property mortgages.

There is no question that the renter moratorium was needed for a period of time to help struggling tenants stay in their homes. But it may have been extended for too long, and now, property owners need help so they can keep the homes and continue to provide rental housing to those who need it.