Letters to Regulators: Letter to Treasury on HAF Implementation

View or download a PDF of the letter here.

Sept. 17, 2021 

The Honorable Dr. Janet L. Yellen
Secretary of the Treasury
U.S. Department of the Treasury
1500 Pennsylvania Avenue, N.W.
Washington, D.C. 20220  

Dear Secretary Yellen, 

On behalf of the clients and communities we represent, we urge the Treasury Department to  ensure accessibility, transparency, and accountability in the Homeowner Assistance Fund (HAF) program. HAF assistance was included in President Biden’s American Rescue Plan because  many homeowners across the nation will be facing foreclosure in the coming months, especially  homeowners of color who have been hardest hit by the pandemic. The success of HAF—and the  preservation of homeownership in communities across the nation—is dependent on establishing  program guidelines that make key information about implementation and participation available  to all stakeholders. Accordingly, the Treasury Department should: 

Ensure that Treasury’s HAF staffing is adequate to provide timely and  comprehensive oversight of the program; 

Make public on the Department’s website the draft HAF plans submitted by  states, territories and tribes; 

Make public on the Department’s website the final HAF plans approved by the  Department; and  

Immediately establish data collection and timely public reporting requirements,  including regarding access by socially disadvantaged individuals, including  homeowners of color. 

As you know, the foreclosure moratorium for government-backed loans has ended and the CFPB  estimates that at least 900,000 homeowners will be exiting payment forbearances before the end  of this year, with many at risk of immediately facing foreclosure because they are exiting without  a payment arrangement in place. HAF Funds will play a key role in helping these homeowners  save their homes. Data already indicate the disparate risk of foreclosure faced by low- and  moderate- income homeowners and homeowners of color. Ensuring equitable distribution of  HAF monies is essential.  

The Census Bureau’s Household Pulse Survey highlights the challenges faced by homeowners of  color and low-income homeowners. In early to mid-August (Week 35), over 13% of Black  homeowners with a mortgage living in owner-occupied properties and over 11% of similarly  situated Hispanic homeowners reported living in households that were behind on their mortgage  payments. This figure rises to over 20% for homeowners with annual income under $25,000.

A recent report by the CFPB reviewing the performance of top mortgage servicing companies  indicated that a significant portion of homeowners are exiting forbearances without payment  arrangements for their delinquency, resulting in ongoing delinquency and a risk of foreclosure.  The Bureau found that the share of borrowers who exited forbearance while still delinquent was,  in the aggregate, in the 10% to 30% range for both federally-backed and private loans. For one  servicer specializing in borrowers with subprime credit, this figure was approximately 60%, and  two that service private loans had delinquent exit rates above 50%. These homeowners are or  will soon be facing foreclosure unless they can make payment arrangements with their mortgage  servicers. 

Homeowners with FHA mortgages are facing particular challenges. According to the Mortgage  Bankers Association National Delinquency Survey for the Second Quarter of 2021, over 12% of  FHA borrowers are delinquent, which is more than three times the rate for conventional loans. FHA is a key source of mortgage funding for homeowners of color and low- and moderate income homeowners; the higher delinquency rate makes clear that the coming foreclosures will  have a disparate impact on these communities. 

Treasury’s implementation of HAF can make a meaningful difference for many homeowners  who otherwise will not be able to save their homes from foreclosure. Despite substantial  expansion of loss mitigation options for homeowners, especially those with government-backed  loans, many homeowners’ needs are unmet. HAF funds will help homeowners with a variety of  unmet needs, including for mortgage reinstatement, delinquent property taxes, homeowners  insurance and HOA fees, and utility bills not covered by other available assistance. Moreover,  HAF assistance is available to certain homeowners who are less likely to be able to obtain  affordable repayment options, such as those with land contracts, manufactured housing, and  reverse mortgages. 

In order to ensure that HAF meets its program goals, Treasury must commit to a transparent  process. Accordingly, we urge Treasury to adopt the following policies in its implementation of  HAF: 

Adequate staffing. The success of Treasury’s work on HAF is dependent upon ensuring that the  HAF team is adequately staffed. To date, Treasury personnel have provided thoughtful guidance  to reflect the statutory goals of the program and have aimed to create an inclusive, effective  program. However, to realize those goals the staff must have adequate dedicated personnel to  review and provide meaningful feedback on HAF plans submitted by states, territories and tribes  and to do so in a manner timely enough to help prevent foreclosures, which are already starting  for some borrowers and will accelerate in the coming months. Servicers of FHA-insured reverse  mortgages, loans made to older homeowners as a means to supplement their income so they can  age in place, have already started referring loans to foreclosure due to the lack of adequate loss  mitigation options in the FHA’s current program rules. 30,000 reverse mortgage borrowers are  expected to be in foreclosure due to property charge defaults by the end of the year. Moreover,  homeowners across the country are increasingly facing foreclosures due to delinquent taxes or  HOA fees. Prompt review of HAF plans is essential for providing these homeowners with the  assistance contemplated by Congress in the American Rescue Plan.

Public posting on Treasury’s website of initial HAF plans submitted by states, territories  and tribes. Many HAF administrators have not shared their submitted plans (although they may  have shared an earlier draft for public comment), leaving stakeholders without information on  whether prior input was incorporated and without access to the current proposal. Some HAF  administrators have posted versions of the plans that were submitted, but these materials lack key  information submitted through Treasury’s portal, such as responses to questions regarding how  the proposal differs from Treasury’s recommended templates, how such provisions may satisfy  program goals, and other details that may have been omitted from published materials. While  posting the final plans, as discussed below, is also crucial, stakeholders need access to submitted  plans in order to provide ongoing meaningful input into the process. Stakeholders recognize the  submitted plans are not final; this is precisely why disclosure at this stage is essential. 

Public posting on Treasury’s website of final HAF plans as approved by the Department  and implemented by HAF administrators. Treasury has not announced any plan to publish  final approved HAF plans. Homeowners, housing counselors and legal services attorneys  working with homeowners, and other community organizations, as well as homeowners  themselves, need access to final HAF plans to understand who may be eligible and for what and  to ensure that eligible applicants are able to access available assistance. The final plans provide  key information about forms of assistance, application procedures, and eligibility and  documentation requirements. While summary information may be useful, homeowners and their  advocates will need access to complete program rules to ensure compliance with guidelines. 

Immediate establishment of data collection and public reporting standards. Reporting  requirements are essential to ensure program compliance, proper federal oversight, stakeholder  accountability, and public confidence that HAF funds are distributed in a fair, effective, and non discriminatory fashion. Accordingly, it is critical for Treasury to collect from each  state/territory/tribal entity detailed information about how program funds are being spent and  how and whether program administrators are satisfying HAF requirements regarding targeting  for socially disadvantaged individuals. Further, Treasury must make as much of that information  public as possible on a timely and consistent basis. This should include loan- and borrower specific data at the census tract level. Timely disclosure of these data is essential to enable  stakeholders to identify gaps and bottlenecks in each HAF program so they can be corrected  early in order to prevent unnecessary foreclosures. During the foreclosure crisis a decade ago,  Hardest Hit Fund data were reported by state and type of use. HAMP data were provided at the  MSA level. Greater detail is warranted for the current program, which reaches every jurisdiction  in the country and comes on the heels of an international pandemic that has hit vulnerable  populations the hardest. 

We appreciate the substantial work the Treasury Department has done already to stand up a  strong HAF program and to engage with stakeholders. We look forward to continuing to work  with you to ensure an efficient and equitable distribution of funds to homeowners facing COVID  hardships. For further discussion, please contact Alys Cohen, Staff Attorney at the National  Consumer Law Center, at acohen@nclc.org or Lisa Sitkin, Senior Staff Attorney at the National  Housing Law Project, at lsitkin@nhlp.org.