Democrats would suspend most debt payments, add housing funds
Pandemic aid proposal would ban evictions, foreclosures, repossessions and wage garnishments
House Democrats’ proposal for the next round of coronavirus economic relief would include nearly $200 billion in long-sought affordable housing and rental assistance funding.
The measure would include a complicated scheme for the Federal Reserve essentially to cover the cost of suspending almost all debt payments for renters, homeowners, student loan borrowers, consumers, small businesses and nonprofit groups.
The package would place broad moratoriums on debt collections and enforcement actions. It would ban evictions, foreclosures, repossessions and wage garnishments. It would apply to an enormous amount of credit, including leases, mortgages, consumer debt, private student loans, small business loans and nonprofit groups’ lines of credit. The moratoriums would last either for a year or 120 days after the pandemic’s disaster declarations end.
[Rural housing losses feared despite rescue spending]
To keep the landlords, mortgage servicers, credit card companies, student lenders, debt collectors, and other creditors afloat, the bill would direct the Fed to stand up credit facilities to provide them long-term, low-interest loans to bridge the sudden stop in repayments. Those facilities would be backed by some of the $454 billion in Treasury Department funds provided in a March economic relief package.
The March bill also allowed homeowners with federally backed mortgages to request payment forbearance for up to a year and imposed a 120-day moratorium on all eviction filings for properties backed by federal mortgage loans. It also allowed federal student loan borrowers to receive forbearance.
Mortgage lenders were quick to pan the ambitious proposals.
“Efforts to require broad mortgage forbearances under the HEROES Act could have negative impacts on the mortgage industry and the economy as a whole,” said National Association of Federally-Insured Credit Unions President Dan Berger said in a release, referring to the acronym for the bill title the Democrats are using.
The Democratic proposal also includes $100 billion for emergency rental assistance grants, which would more than double the Department of Housing and Urban Development’s entire budget, and $75 billion for homeowner assistance.
The bill would spread funding around to many HUD programs aimed at providing affordable housing, including:
- $4 billion in Tenant-Based Rental Assistance grants for public housing agencies (PHAs);
- $2 billion in Public Housing Operating Fund grants for PHAs;
- $5 billion in Community Development Block Grants;
- $11.5 billion in Homeless Assistance Grants;
- $750 million in Project-based Rental Assistance;
- $500 million for housing the elderly;
- $200 million for housing people with disabilities;
- $100 million for housing counseling assistance.
The bill also would give community development financial institutions $1 billion in grants with few strings attached on their use.
Much of the new funds would overlap with preexisting Democratic goals on increasing the stock of affordable housing. The House Financial Services Committee advanced a bill from Chairwoman Maxine Waters, D-Calif., just before COVID-19 upended life that would spend $100 billion on building public housing.
Republican leaders have already called Democrats’ coronavirus bill dead on arrival. House Minority Leader Kevin McCarthy called it a “liberal wish list.”
The third relief bill passed in March gave HUD $17.4 billion in additional funding.