Help to Avoid Mortgage Default

Mortgage Assistance Program Expansion Estimated to Help More Than 1,000 Additional Marylanders Stay in Their Homes Since Homeowner Assistance Fund Program Began in 2021, the Maryland Department of Housing and Community Development has Assisted More Than 11,000 Marylanders Residents Behind on Payments, Housing Costs NEW CARROLLTON (May 25, 2023) — The Maryland Department of Housing and Community Development has helped more than 11,000 homeowners behind on housing-related payments, including 6,000 who were facing foreclosure, stay in their homes since the Homeowner Assistance Fund program launched in March 2021. The Department has expanded the program to add an additional option for mortgage servicers to provide eligible homeowners with relief as interest rates have risen and affected the affordability of some loan modifications. The program now is able to fund up to six months of forward payments for eligible applicants, and is estimated to help more than 1,000 additional Marylanders.  “The department has quickly adapted the Homeowner Assistance Program to extend its reach given new housing market conditions that didn’t exist when the program started,” said Jake Day, Secretary of the Maryland Department of Housing and Community Development. “This assistance supports long-term, sustainable solutions for homeowners who are still dealing with the aftereffects of pandemic-related hardships.” The Homeowner Assistance Fund offers legal assistance, loan modifications with payment of delinquent mortgages, grants to avoid displacement due to property taxes, association and water and sewer fees, and other housing related costs. So far, the program has provided more than $125 million to eligible homeowners, with an average of $17,100 of assistance for each household. One such homeowner, a Bowie resident, was days away from foreclosure and shared their story on working with the Maryland Homeowner Assistance Fund.  “If it were not for DHCD and its Homeowners Assistance Fund team, I would have lost my home to foreclosure,” the resident wrote to the Department. “I was in a Chapter 13 bankruptcy and fell behind on mortgage payments due to COVID-related income reduction. I had consultations with two lawyers and they both informed me that time was not on my side and to try to sell my house as quickly as possible so I could get some equity out of it, but they were even pessimistic about that. I'm a single parent and was very scared of how losing my home would impact my 12-year-old daughter. My home was about 7 days away from a foreclosure sale when HAF stepped in and processed my application. The foreclosure sale was canceled two days later and my loan was reinstated. HAF also paid for my water bill arrears! Shout out to HAF for having such amazing staff!” No additional application is required to be considered for the new forward payment option, and the Department is also reviewing past applications to determine if those homeowners would be eligible for the forward payment option and reaching out to them to offer assistance. For more detailed information on eligibility and to apply for assistance, go to homeownerassistance.maryland.gov. The HAF program was established by the American Rescue Plan Act enacted in 2021 to help homeowners experiencing financial hardship after January 21, 2020. The Maryland Department of Housing and Community Developm​ent was awarded a total of $248 million to administer through the program. # # #

CONTACT: Brandi Bottalico, Director, Office of Public Information - brandi.bottalico@maryland.gov

 Mortgage Inequities

New Research Finds Black Seniors are Disproportionately Denied Mortgage-Based Loans

Many seniors have built up considerable wealth in their homes. Some 78% of 65-to-74-year-olds own their homes, as do 82% of those 75 and older. As of 2019, 47% of homeowners’ median net worth was in their home equity:  58% percent for Hispanic homeowners and 59% for Black homeowners.

The Urban Institute's just-released research report found that the Home Equity Conversion Mortgage (HECM) option tapping home equity could financially help Black senior homeowners, but they are disproportionately denied access at every age and income level. Black HECM applicants experience higher denial rates than white applicants for all age groups, and this denial gap persists at all loan amount levels across all neighborhood incomes.

Using 2021 HMDA data, it was found that the denial rate for Black HECM applicants is the highest across all age groups: 21.5% of Black applicants ages 62 to 74 are denied, compared with 12.0% for white applicants. The overall denial rates for applicants over 75 decrease for white, Black, and Hispanic borrowers, but the Black-white denial gap persists and is 6.9 percentage points. 

Regarding loan amount and neighborhood income, Black applicants persistently experience higher denial rates. For Black applicants with loan amounts under $100,000, 36.4% living in low- and moderate-income neighborhoods are denied HECMs, compared with 19.5% of white applicants. This gap continues even for those living in upper-income neighborhoods: 14.7% of Black applicants with $200,000-$300,000 loan amounts are denied, compared with 9.3% of white applicants. Another study (Lindsey-Taliefero and Kelly, 2021), using 2019 HMDA data had consistent findings that Black applicants are more likely to be denied a reverse mortgage after controlling for age, gender, and income. 

One reason Black applicants have higher denial rates could be financial precarity associated with limited liquid wealth and postretirement income. In 2021, 33.8% of Black HECM applicants were denied because of insufficient cash. The median liquid net worth for Black homeowners over 62 is only $3,500, compared with $104,000 for white homeowners. Only 29.3% of Black homeowners over 62 have individual retirement accounts compared to white homeowners' 54.8%. Although HECMs provide flexible payment plans, they have high up-front costs and high annual mortgage insurance premiums (MIPs). The average Black applicant cannot afford these up-front costs. For a Black homeowner HECM applicant with a median value of $125,000, the 2% up-front MIPs plus the costs for home appraisal and counseling requires the applicant to pay at least $3,175 at closing, excluding other costs such as the annual MIPs and third-party charges. But the median liquid net wealth owned by a Black senior homeowner is only $3,500. For a white owning a home with a $220,000 median value, this cost structure incurs $5,075 in the first year, far less than the $104,000 median liquid wealth of white senior homeowners.

Another reason for the higher denial rates is that Black senior homeowners have much less housing wealth in late life than white senior homeowners. Among Black applicants over 62, 25.0% of all denials are because of insufficient collateral. Research shows that Black homeowners are more likely than white homeowners to have mortgage debt, even in late life. This mortgage burden limits the amount of collateral value Black households could tap to qualify for a HECM. 

Because Black borrowers tend to have low incomes and low credit scores attributable to structural barriers and historic discrimination, the financial assessment further decreases the amount of home equity Black senior homeowners can borrow, making them less likely to tap home equity and less likely to get approved for a HECM loan. 

The report sums that homeowners of color are disproportionately "denied for these loans because of decades of historical and structural racism in our financial system. Structural barriers in the mortgage finance system make it less likely for Black homeowners to refinance when interest rates are low, which increases their debt burden over time (Gerardi, Willen, and Zhang 2023). In addition, Black people are disproportionately likely to have thin or no credit files, increasing the likelihood of escrowing future property tax and insurance payments required in the financial assessment, which, in turn, limits the amount of home equity they can borrow."

*****

Read the February 23, 2023 Urban Institute research brief.

Read the January 14, 2023 Urban Institute report.

Read the February 23, 2023 Research Mortgage Daily article.