Welcome to a new era of poverty.
You probably won’t notice it for a while, what with this hysteria over the virus having seamlessly transformed into hysteria over a birdwatcher freakout – but it is here.
Americans are skipping payments on mortgages, auto loans and other bills. Normally, that could mean massive foreclosures, evictions, cars repossessions and people’s credit getting destroyed.
But much of that has been put on pause. Help from Congress and leniency from lenders have kept impending financial disaster at bay for millions of people. But that may not last for long.
And millions of people are getting help from all kinds of lenders. According to the latest available numbers from the credit bureau TransUnion, about 3 million auto loans and 15 million credit card accounts are in some kind of program to let people skip or make partial payments. Those are probably low estimates. According to the analytics company Black Knight, 4.75 million homeowners — or 9% of all mortgages — have entered into forbearance plans.
Lawmakers don’t want these delayed payments to hurt credit scores. Congress mandated that people who were current on their payments before the outbreak should still be reported as current on their payments while in a hardship program. And that appears to working for now.
“What we’re seeing consistently across the board is actually credit scores are moving upward,” says Matthew Komos, a vice president at TransUnion. He says that’s both on a month-to-month and year-over-year basis.
But looking ahead, advocates say people could run into big trouble because the terms of these hardship programs can be all over the map.
“Credit cards, auto loans, installment loans, there are no federal guidelines,” says Aracely Panameño, a director at the nonprofit Center for Responsible Lending.
She says when it comes time to make up for all those skipped payments, there are federal rules for repayment plans for home mortgages but not for many other types of loans. So she says lawmakers need to protect people. Otherwise, she says, lenders could make demands beyond what people can afford. “You must have a capacity to catch up with your payments in an affordable way,” Panameño says.
Chi Chi Wu with the National Consumer Law Center agrees. Without better protections, when it comes time to make up for the missed payments, “there’s going to be a lot of people who could experience massive credit reporting harm,” says Wu, an attorney focusing on consumer credit issues.
CHI CHI WU!
Under the rules for mortgages, consumer advocates say the vast majority of people hurt financially during the outbreak who entered a forbearance plan should have their missed payments moved to the end of the loan term.
That keeps monthly payments the same as they were before and just extends the amount of time to pay the loan. Some other types of lenders are using this approach. Ford tells NPR it is taking missed payments and moving them to the end of the auto loan term.
For their part, many lenders say that to keep helping people, they need a government conduit through which to borrow money themselves. Bill Himpler is president and CEO of the American Financial Services Association, which represents lenders who make car loans, personal loans and mortgages and offer credit cards.
One big thing lawmakers need to resolve is whether to extend the federal government’s expanded unemployment benefits. Getting that unemployment money is the biggest reason most people who’ve lost jobs are able to pay rent and keep a roof over their heads. And while some people are going back to work, many others are not.
“When the $600-a-week unemployment insurance runs out at the end of July, most people expect tremendous displacement risk,” says Andrew Jakabovics with the affordable housing nonprofit Enterprise Community Partners. “Evictions are likely to go through the roof.”
They pretty much have to keep the government money coming, both to the unemployed and to the lenders, unless they want everything to explode for no reason. I don’t think Congress wants that to happen, since they would be immediately blamed.
Then, if they do keep the money coming, that might hyperinflate the dollar. But if they do it right, maybe they can avoid “Weimar children playing with money” scenes, and just have the dollar slowly fade into the night over the course of a decade.
It seems like you can do whatever you want to the masses, as long as you avoid huge shocks. Or just dazzle them with flu paranoia.
And with eviction moratoriums expiring in parts of the country, he says action is needed right away to help people who can’t pay the rent as the pandemic drags on.
Meanwhile, as with many other aspects of the coronavirus outbreak, there are disparities along socioeconomic and racial lines. Panameño says her group did a national survey to see who was having trouble paying their bills after the pandemic struck.
“Twenty-five percent of Latinos had already fallen behind with their payments,” she says. “Twenty-eight percent of African Americans had fallen behind. That compares to 12% of whites that had fallen behind.”
Wait, isn’t that what caused the 2008 crash?
A bunch of diverse colorfuls getting loans they could never pay back?
We were doing that again, even before the coronavirus hoax?
Get ready for breadlines and don’t say I didn’t warn you…!
You should have protested this flu hoax…!