California, Banks Agree to 90-Day Moratorium on Mortgage Payments

On Wednesday, Governor Gavin Newsom announced that more than 400 banks, charter banks, and credit unions have agreed to giving homeowners with mortgages a 90-day moratorium on payments due to job loss and hardships during the COVID-19 coronavirus pandemic.

California homeowner mortgage relief

Banks that agreed to the moratorium include those with the most backed-mortgages in the state, including Chase, Citi Bank, US Bank, and Wells Fargo.

“Families should not lose their homes because of COVID-19,” announced Governor Newsom on Twitter. “Very pleased that Wells Fargo, Citi, JPMorgan, and US Bank have agreed to a 90 day grace period for mortgage payments for those impacted by Covid-19. A big sigh of relief for millions of CA families.”

Families should not lose their homes because of COVID-19. Very pleased that Wells Fargo, Citi, JPMorgan, and US Bank have agreed to a 90 day grace period for mortgage payments for those impacted by #COVID19.

A big sigh of relief for millions of CA families.

— Gavin Newsom (@GavinNewsom) March 25, 2020

“This new grace period won’t erase any payments,” explained Redding-based banker Danielle Robertson. “All it will do is allow for three months being open now in exchange for tacking on three months to your mortgage. So if you take this and your mortgage would have been paid off in, say, July 2022, you now have August, September, and October of that year to pay instead of April, May, and June of 2020.”

“I got calls about this today asking if the government is paying it. Well, they aren’t. It’s just shifted.”

Few good scenarios for renters and landlords

While homeowners are now protected through the late-projected end of the lockdown, the 45% of California’s population who are renters have not received such a plan.

Currently that responsibility has fallen on county and local jurisdictions. And even then it has only gone so far as eviction freezes, as per Governor order. Areas such as Los Angeles and the Bay Area have enacted such measures so far, but it still largely depends on the jurisdiction.

“Rent relief or a rent moratorium would be really tricky to do,” added Robertson. “Mortgages are bank-backed, but rents are on the landlord, and many are worried about non-payments.”

“There are three likely scenarios right now, none good. The government, either federal or state, can come in and pay rent for a month or two as part of a relief plan, but then the burden is on taxpayers, and that kind of payment would be astronomical, even if it was a half-rent situation.”

“You could also have a possibility of stimulus money going directly to your landlord for payment if you missed a month, but that causes a lot of issues, including the fact that that money is supposed to go right back into the economy to help it, and under this way, it wouldn’t do that so much.”

“There’s the scenario where landlords pass the loss onto banks who would simply have to eat the loss for a few months, but that would be disastrous to them, and odds are they would need a bailout, so taxpayers hurt once again. You can also delay payments like mortgages then pay it all when the lockdown ends, but that causes a lot of problems with paying back and those renters probably not having the money.”

“Or we can go on the current track and simply collect rent as usual. Most rents would be paid, but a decent amount would not be, so by the time eviction-freezes end, there’s going to be a huge backlog of evictions, and that means a lot of people thrown into the street for non-payment. The eviction moratoriums only do so much, and landlords and the bank will want that. In the landlords case they need the income since that is their job.”

“There’s a lot of other scenarios and factors too, but these are a few possibilities for renters coming up. And no matter what way, someone, somewhere is getting screwed. Do you want to hurt renters, hurt landlords, hurt banks, or hurt the government and taxpayers?”

“Oh, and that’s not even getting into what this will do to the housing crisis in California. It’s going to hurt that too.”

Currently some counties in California have passed measures to allow back payments of rents going so far as six months if they can prove hardship, but it’s not known what the long-term effects of such programs will be.

“That’s honestly one of the best options,” continued Robertson. “But landlords would have to be accommodating if they can afford it. If they can’t, but the city has such a law in place, it’s just passing on the hardships.”

“Like I said, there’s no good scenario here.”

Possible rent strikes in April

Because of the uncertainty and many people being unable to afford rent and other payments due to the shutdown and loss of work, many cities are now facing possible general rent strikes. New York City currently has many renters calling for a refusal of payment come April 1st, but many other cities are facing that, including San Diego.

“It’s happening among commercial renters now too with the Cheesecake Factory refusing to pay,” added Joshua Diaz, a banker in Long Beach. “People like to think that landlords are these wealthy people, but many aren’t. Many have this as their sole source of income. So if they can’t get rents, they can’t pay their mortgage on an apartment complex. In turn guess whose problem this becomes and what isn’t covered under the 90-day freeze? Banks.”

“The trouble is that so many people are hurting and that relief options are currently limited. Homeowners will be ok for awhile, but renters it’s still very much up in the air. Landlords too. They also want help.”

California’s eviction freeze currently ends on May 31st, while the 90-day mortgage free is expected to end in June.