THE BASIS POINT

Coronavirus Mortgage, Rent & Tax Relief In America vs. Italy & UK

Coronavirus mortgage, rent, tax relief in America vs. Italy and UK - The Basis Point Coronavirus update March 12, 2020

After extending a 16 million person coronavirus containment lockdown to 60 million people, Italy’s deputy finance minister said this week it would work with banks to suspend mortgage payments to help citizens. UK banks are starting to take similar measures. In America, federal regs will provide mortgage and tax relief, and local regs will provide rental relief. Each of these topics is summarized in the sections below.

[UPDATE!!: Coronavirus Rental, Mortgage & Credit Card Payment Relief Coming Fast]

ITALY’S CONRONAVIRUS MORTGAGE RELIEF

Not many details yet on how long payments on Italian mortgages might be paused to help consumers. Also no details yet on whether interest would accrue while payments are on pause. But Reuters at least confirmed that banks are on board with the government’s plan:

Italy’s banking lobby ABI said on Monday lenders representing 90% of total banking assets would offer debt moratoriums to small firms and households grappling with the economic fallout from Italy’s coronavirus outbreak.

Whether government assistance will even help in Italy is questionable according to FT Alphaville’s Jamie Powell.

On the one hand, Powell reports only 13% of Italian households hold properties with mortgages on them. On the other hand, €200 billion of Italy’s bank bonds were owned by households, and Italian banks have about €382 billion of mortgages on their balance sheets.

As such, Powell explains why Italy’s proposed mortgage relief could be circular:

So we’re in a potential situation where banks may have to defer collecting mortgage payments, shunning income which is used to pay bondholders, who may turn out to be the very citizens who the policy was designed to relieve in the first place.

In one pocket, and out the other.

It’s important to stress that this is all theoretical. It could be the case that the Italian government, under laxer fiscal constraints from the EU, pays the interest costs in lieu of its citizens.

Another possibility is the banks accrue the deferred interest payments over the designated relief period, and then collect the payments over a period of time, say two to three years, which doesn’t impact household spending or banking revenues too much.

UK’s CONRONAVIRUS MORTGAGE RELIEF

As for the UK, Powell reported about 28% of households hold properties with mortgages on them, and the BBC reports various banks offering mortgage help.

The coronavirus situation is much less acute in the UK, with 459 confirmed cases and 8 deaths as of now.

Italy by comparison has 12,462 confirmed coronavirus cases and 827 deaths as of now.

Below are European and global coronavirus stats the FT is compiling in realtime (see data sources in footer of image 2).

European Coronavirus Cases as of March 12, 2020 - data compiled by Financial Times

Global Coronavirus Cases and Deaths as of March 12, 2020 - data compiled by Financial Times

CONRONAVIRUS MORTGAGE & RENTAL RELIEF IN AMERICA

As for America, we’ve got 1312 confirmed coronavirus cases and 38 deaths as of now.

Our government’s response has been slower. So that number could be higher, but it’s not high enough yet for banks to start talking about mortgage relief.

However we do have regulators like the Federal Housing Finance Agency (FHFA) and the Federal Housing Administration (FHA). Banks and lenders must follow FHFA and FHA rules if they want the government to back their mortgages.

These rules call for helping borrowers in need by pausing payments during times of hardship like natural disasters — or health crises.

This week, the FHFA and FHA reminded banks and lenders about helping borrowers. HousingWire reports (I added bold brackets to these excerpts):

[FHFA said in a statement] “To meet the needs of borrowers who may be impacted by the coronavirus, last week Fannie Mae and Freddie Mac (“the Enterprises”) reminded mortgage servicers that hardship forbearance is an option for borrowers who are unable to make their monthly mortgage payment.”

[FHA said in a statement] “As with any other event that negatively impacts a borrower’s ability to pay their monthly mortgage payment, FHA’s suite of loss mitigation options provides solutions that mortgagees should offer to distressed borrowers – including those that could be impacted by the Coronavirus – to help prevent them from going into foreclosure. These home retention options are located in FHA’s Single Family Housing Policy Handbook 4000.1 Section III.A.2.”

[Fannie Mae said in a statement] “We want to remind servicers that you can offer forbearance in accordance with our existing policies to assist borrowers who are unable to make their monthly mortgage loan payment as a result of a temporary hardship (for example, if a borrower is quarantined and unable to work). The servicer should evaluate the borrower for a forbearance plan or other workout assistance in accordance with our existing requirements.”

Additionally, HousingWire also reports about how local governments are trying to help renters from being evicted if they can’t pay their rent for certain periods of time.

CONRONAVIRUS TAX FILING RELIEF IN AMERICA

And finally, we also might get tax filing relief.

Yesterday, Treasury Secretary Steve Mnuchin recommended extending the April 15 deadline and not imposing late fees or penalties for “virtually all Americans other than the super rich.”

And last night Trump confirmed this action was moving forward.

Details to come on all of this as it develops, and links below with the latest.

I know this situation is very real for lots of folks worried about employment and ability to pay the bills. So please reach out if you have updates on mortgage or rent payment issues.
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Reference:

Italy’s Coronavirus Mortgage Relief – in 1 pocket, out the other

Coronavirus: UK Banks To Allow Customers To Defer Mortgage Payments

How U.S. government is helping with mortgage relief

How local governments in the U.S. are helping with rental relief

Trump Administration To Delay April 15 Tax Filing For Most Americans

What If Mortgage Rates Drop After I Lock My Loan?