Several major banks and other financial institutions have agreed to delay foreclosures and provide mortgage relief to California homeowners struggling to make their monthly payments due to the novel coronavirus outbreak, Gov. Gavin Newsom announced Wednesday.
The aid comes as more than a million Californians have applied for unemployment benefits this month due to layoffs or reduced hours amid the pandemic, Newsom said.
Eligible homeowners could defer mortgage payments for at least three months and possibly longer if they suffer hardship from the pandemic. Any late payment would not be reported to the credit agencies.
Newsom said the mortgage relief package was negotiated with four of the nation’s largest banks — Wells Fargo, US Bank, CitiBank and JP Morgan Chase — as well as 200 state-chartered banks and credit unions.
“We still have people struggling to get back to where they were before the Great Recession,” Newsom said of the financial hardships Californians have faced, now exacerbated by the coronavirus outbreak. “People are older and still struggling. And so these are individuals who, once again, are disproportionately affected by this moment.
At a press conference to announce homeowner assistance, Newsom noted that Bank of America had only agreed to allow customers to defer mortgage payments for only one month, but said he hoped the institution “would do the right thing” in the near future.
Bank of America disputed Newsom’s assertion that it was reluctant to provide more generous mortgage relief to homeowners.
“Bank of America is deferring mortgage payments on a monthly basis until the crisis is over,” spokesman Bill Halldin said.
Diana Dykstra, president and CEO of the California Credit Union League, the state’s trade association for credit unions, said: “We are always the first to reach out to our members and do whatever we can to help them when they have financial difficulties.”
The governor’s announcement on Wednesday came a week after Newsom ordered all California residents to stay home to help stem the spread of the virus, with limited exceptions for essential workers – including doctors, nurses , grocery store employees and truck drivers. Residents are allowed to leave the house for necessities, such as trips to the supermarket and to see the doctor, and to go out for recreation, but are asked to keep a safe distance from others.
Thousands of Californians have lost their jobs or seen their hours of work drastically reduced, especially in hospitality and services.
Newsom hailed the bipartisan agreement in Washington to boost unemployment benefits and help struggling Americans during the outbreak’s devastating blow to the economy, saying help is desperately needed in California.
“We have just passed the one million mark in terms of the number of [unemployment] just been pretending since March 13,” Newsom said. “A million Californians have now claimed the need for unemployment insurance, so it can’t happen soon enough.”
Along with mortgage relief, Newsom is urging banks and other lenders to provide financial assistance to small businesses and student loan recipients “in the days and weeks ahead,” according to a recent email sent to financial institutions by the State Department of Enterprise Surveillance Commissioner. Manuel P. Alvarez.
“As we continue the battle on the public health front, we must also prepare for a financial crisis that is just beginning,” Alvarez said in the email. “Now is the time for all institutions, public and private, to do their part to avert a tsunami of financial damage sweeping through California consumers.”
Millions of Californians were already struggling to pay their mortgages and rent in a state where housing prices and rents have skyrocketed in recent years, putting them at risk of losing their homes due to a sudden loss of income.
Similar mortgage relief measures were put in place for homeowners in response to the Great Recession, when housing markets crashed and millions of Americans lost their homes to foreclosure.
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The federal government announced earlier this month that Americans with loans guaranteed by government-sponsored agencies Fannie Mae or Freddie Mac would be eligible to defer mortgage payments and be protected from foreclosure if they cannot enable payments to be made due to the epidemic.
The financial assistance the governor announced for landlords is far greater than what tenants across the state are receiving.
Unlike some other states, California did not implement a statewide ban on evictions and offered no full deferral of rent payments – even though California has far more renters than anywhere else in the US
The state’s 55% homeownership rate is one of the lowest in the nation, according to U.S. Census data. The majority of LA County residents are renters, with only 46% of households owning their homes.
Last week, Newsom issued an executive order asking — but not requiring — cities and counties to temporarily ban evictions for tenants affected by the coronavirus, something Los Angeles and other local governments were already doing.
But only a fraction did. More than 30 state lawmakers sent a letter to the governor on Wednesday asking him to do more. The letter says only 50 of the state’s 539 cities and counties have implemented their own temporary eviction bans.
“With many tenants suddenly out of work and rent due the first week of April, it is critical that the state acts now to assure tenants they will not be evicted,” the letter said.
The letter follows a similar appeal to Newsom last week from more than 140 housing, civil liberties, student and labor groups asking him for greater eviction relief.
At Wednesday’s press conference, the governor said he was frustrated that few cities have passed eviction bans.
“We are very concerned about what is happening – or not happening – at the local level,” Newsom said.
While Newsom said he could still implement a statewide moratorium, he noted he was hesitant due to unspecified state-specific legal issues. The governor’s office did not respond to a request for more details on those concerns.
Last week, John Sprankling, a property law expert and professor at the University of the Pacific’s McGeorge School of Law in Sacramento, told the Times that the state had significant power to enact a temporary ban on eviction in an emergency.
“There would definitely be litigation over that,” Sprankling said. “Some owners are going to lose a significant amount of money. But it’s pretty easy to predict that the courts are going to say they’re not entitled to compensation from the state.
As of Wednesday morning, Newsom said 2,535 people in the state have tested positive for COVID-19, including 37 children under the age of 17. Newsom also said the state has now tested more than 66,800 people but is still stuck with slow results.
Dr. Mark Ghaly, secretary of the California health and human services agency, said virus cases are doubling every three to four days in California and an increase in hospitalizations is expected to occur within one to two weeks. under current conditions.
Times writers Anita Chabria and Ben Poston contributed to this report.