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Is an Algorithm Less Racist Than a Loan Officer?

In 2015, Melany Anderson’s 6-year-old daughter came home from a play date and asked her mother a heartbreaking question: Why did all her friends have their own bedrooms?

Ms. Anderson, 41, a pharmaceutical benefits consultant, was recently divorced, living with her parents in West Orange, N.J., and sharing a room with her daughter. She longed to buy a home, but the divorce had emptied her bank account and wrecked her credit. She was working hard to improve her financial profile, but she couldn’t imagine submitting herself to the scrutiny of a mortgage broker.

“I found the idea of going to a bank completely intimidating and impossible,” she said. “I was a divorced woman and a Black woman. And also being a contractor — I know it’s frowned upon, because it’s looked at as unstable. There were so many negatives against me.”

Then, last year, Ms. Anderson was checking her credit score online when a pop-up ad announced that she was eligible for a mortgage, listing several options. She ended up at Better.com, a digital lending platform, which promised to help Ms. Anderson secure a mortgage without ever setting foot in a bank or, if she so desired, even talking to another human.

In the end, she estimated, she conducted about 70 percent of the mortgage application and approval process online. Her fees totaled $4,000, about half the national average. In November 2019, she and her daughter moved into a two-bedroom home not far from her parents with a modern kitchen, a deck and a backyard. “We adapted to the whole Covid thing in a much easier way than if we were still living with my parents,” Ms. Anderson said this summer. “We had a sense of calm, made our own rules.”

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Credit…Bryan Anselm for The New York Times

Getting a mortgage can be a harrowing experience for anyone, but for those who don’t fit the middle-of-last-century stereotype of homeownership — white, married, heterosexual — the stress is amplified by the heightened probability of getting an unfair deal. In 2019, African Americans were denied mortgages at a rate of 16 percent and Hispanics were denied at 11.6 percent, compared with just 7 percent for white Americans, according to data from the Consumer Finance Protection Bureau. An Iowa State University study published the same year found that L.G.B.T.Q. couples were 73 percent more likely to be denied a mortgage than heterosexual couples with comparable financial credentials.

Digital mortgage websites and apps represent a potential improvement. Without showing their faces, prospective borrowers can upload their financial information, get a letter of pre-approval, customize loan criteria (like the size of the down payment) and search for interest rates. Software processes the data and, and if the numbers check out, approves a loan. Most of the companies offer customer service via phone or chat, and some require that applicants speak with a loan officer at least once. But often the process is fully automated.

Last year, 98 percent of mortgages originated by Quicken Loans, the country’s largest lender, used the company’s digital platform, Rocket Mortgage. Bank of America recently adopted its own digital platform. And so-called fintech start-ups like Roostify and Blend have licensed their software to some of the nation’s other large banks.

Reducing — or even removing — human brokers from the mortgage underwriting process could democratize the industry. From 2018 to 2019, Quicken reported a rise in first-time and millennial home buyers. Last year, Better.com said, it saw significant increases in traditionally underrepresented home buyers, including people of color, single women, L.G.B.T.Q. couples and customers with student loan debt.

“Discrimination is definitely falling, and it corresponds to the rise in competition between fintech lenders and regular lenders,” said Nancy Wallace, chair in real estate capital markets at Berkeley’s Haas School of Business. A study that Dr. Wallace co-authored in 2019 found that fintech algorithms discriminated 40 percent less on average than face-to-face lenders in loan pricing and did not discriminate at all in accepting and rejecting loans.

If algorithmic lending does reduce discrimination in home lending in the long term, it would cut against a troubling trend of automated systems — such as A.I.-based hiring platforms and facial recognition software — that turn out to perpetuate bias. Faulty data sources, software engineers’ unfamiliarity with lending law, profit motives and industry conventions can all influence whether an algorithm picks up discriminating where humans have left off. Digital mortgage software is far from perfect; the Berkeley study found that fintech lenders still charged Black and Hispanic borrowers higher interest rates than whites. (Lending law requires mortgage brokers to collect borrowers’ race as a way to identify possible discrimination.)

“The differential is smaller,” Dr. Wallace said. “But it should be zero.”

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Credit…Benjamin Rasmussen for The New York Times

Better.com started in 2016 and is licensed to underwrite mortgages in 44 states. This year, the company has underwritten about 40,000 mortgages and funds roughly $2.5 billion in loans each month. After a Covid-19 slump in the spring, its fund volume for June was five times what it was a year ago.

With $270 million in venture funding, the company generates revenue by selling mortgages to about 30 investors in the secondary loan market, like Fannie Mae and Wells Fargo. The company attracts customers as it did Ms. Anderson: buying leads from sites like Credit Karma and NerdWallet and then marketing to those customers through ads and targeted emails.

In 2019, Better.com saw a 532 percent increase in Hispanic clients between the ages of 30 and 40 and a 411 percent increase in African-Americans in the same age bracket. Its married L.G.B.T.Q. client base increased tenfold. “With a traditional mortgage, customers feel really powerless,” said Sarah Pierce, Better.com’s head of operations. “You’ve found a home you love, and you’ve found a rate that’s good, and somebody else is making the judgment. They’re the gatekeeper or roadblock to accessing financing.” Of course, Better.com is making a judgment too, but it’s a numerical one. There’s no gut reaction, based on a borrower’s skin color or whether they live with a same-sex partner.

Trevor McIntosh, 35, and Brennan Johnson, 31, secured a mortgage for their Wheat Ridge, Colo., home through Better.com in 2018. “We’re both millennials and we need to immediately go online for anything,” said Mr. Johnson, a data analyst. “It seemed more modern and progressive, especially with the tech behind it.”

Previously, the couple had negative home buying experiences. One homeowner, they said, outright refused to sell to them. A loan officer also dropped a bunch of surprise fees just before closing. The couple wasn’t sure whether prejudice — unconscious or otherwise — was to blame, but they couldn’t rule it out. “Trevor and I have experienced discrimination in a variety of forms in the past, and it becomes ingrained in your psyche when interacting with any institution,” said Mr. Johnson. “So starting with digital, it seemed like fewer obstacles, at least the ones we were afraid of, like human bias.” (Better.com introduced me to Ms. Anderson, Mr. McIntosh and Mr. Johnson, and I interviewed them independently.)

Digital lenders say that they assess risk using the same financial criteria as traditional banks: borrower income, assets, credit score, debt, liabilities, cash reserves and the like. These guidelines were laid out by the Consumer Finance Protection Bureau after the last recession to protect consumers against predatory lending or risky products.

These lenders could theoretically use additional variables to assess whether borrowers can repay a loan, such as rental or utility payment history, or even assets held by extended family. But generally, they don’t. To fund their loans, they rely on the secondary mortgage market, which includes the government-backed entities Freddie Mac and Fannie Mae, and which became more conservative after the 2008 crash. With some exceptions, if you don’t meet the standard C.F.P.B. criteria, you are likely to be considered a risk.

Fair housing advocates say that’s a problem, because the standard financial information puts minorities at a disadvantage. Take credit scores — a number between 300 and 850 that assesses how likely a person is to repay a loan on time. Credit scores are calculated based on a person’s spending and payment habits. But landlords often don’t report rental payments to credit bureaus, even though these are the largest payments that millions of people make on a regular basis, including more than half of Black Americans.

For mortgage lending, most banks rely on the credit scoring model invented by the Fair Isaac Corporation, or FICO. Newer FICO models can include rental payment history, but the secondary mortgage market doesn’t require them. Neither does the Federal Housing Administration, which specializes in loans for low and moderate-income borrowers. What’s more, systemic inequality has created significant salary disparities between Black and white Americans.

“We know the wealth gap is incredibly large between white households and households of color,” said Alanna McCargo, the vice president of housing finance policy at the Urban Institute. “If you are looking at income, assets and credit — your three drivers — you are excluding millions of potential Black, Latino and, in some cases, Asian minorities and immigrants from getting access to credit through your system. You are perpetuating the wealth gap.”

For now, many fintech lenders have largely affluent customers. Better.com’s average client earns over $160,000 a year and has a FICO score of 773. As of 2017, the median household income among Black Americans was just over $38,000, and only 20.6 percent of Black households had a credit score above 700, according to the Urban Institute. This discrepancy makes it harder for fintech companies to boast about improving access for the most underrepresented borrowers.

Software has the potential to reduce lending disparities by processing enormous amounts of personal information — far more than the C.F.P.B. guidelines require. Looking more holistically at a person’s financials as well as their spending habits and preferences, banks can make a more nuanced decision about who is likely to repay their loan. On the other hand, broadening the data set could introduce more bias. How to navigate this quandary, said Ms. McCargo, is “the big A.I. machine learning issue of our time.”

According to the Fair Housing Act of 1968, lenders cannot consider race, religion, sex, or marital status in mortgage underwriting. But many factors that appear neutral could double for race. “How quickly you pay your bills, or where you took vacations, or where you shop or your social media profile — some large number of those variables are proxying for things that are protected,” Dr. Wallace said.

She said she didn’t know how often fintech lenders ventured into such territory, but it happens. She knew of one company whose platform used the high schools clients attended as a variable to forecast consumers’ long-term income. “If that had implications in terms of race,” she said, “you could litigate, and you’d win.”

Lisa Rice, the president and chief executive of the National Fair Housing Alliance, said she was skeptical when mortgage lenders said their algorithms considered only federally sanctioned variables like credit score, income and assets. “Data scientists will say, if you’ve got 1,000 bits of information going into an algorithm, you’re not possibly only looking at three things,” she said. “If the objective is to predict how well this person will perform on a loan and to maximize profit, the algorithm is looking at every single piece of data to achieve those objectives.”

Fintech start-ups and the banks that use their software dispute this. “The use of creepy data is not something we consider as a business,” said Mike de Vere, the chief executive of Zest AI, a start-up that helps lenders create credit models. “Social media or educational background? Oh, lord no. You shouldn’t have to go to Harvard to get a good interest rate.”

In 2019, ZestFinance, an earlier iteration of Zest AI, was named a defendant in a class-action lawsuit accusing it of evading payday lending regulations. In February, Douglas Merrill, the former chief executive of ZestFinance, and his co-defendant, BlueChip Financial, a North Dakota lender, settled for $18.5 million. Mr. Merrill denied wrongdoing, according to the settlement, and no longer has any affiliation with Zest AI. Fair housing advocates say they are cautiously optimistic about the company’s current mission: to look more holistically at a person’s trustworthiness, while simultaneously reducing bias.

By entering many more data points into a credit model, Zest AI can observe millions of interactions between these data points and how those relationships might inject bias to a credit score. For instance, if a person is charged more for an auto loan — which Black Americans often are, according to a 2018 study by the National Fair Housing Alliance — they could be charged more for a mortgage.

“The algorithm doesn’t say, ‘Let’s overcharge Lisa because of discrimination,” said Ms. Rice. “It says, ‘If she’ll pay more for auto loans, she’ll very likely pay more for mortgage loans.’”

Zest AI says its system can pinpoint these relationships and then “tune down” the influences of the offending variables. Freddie Mac is currently evaluating the start-up’s software in trials.

Fair housing advocates worry that a proposed rule from the Department of Housing and Urban Development could discourage lenders from adopting anti-bias measures. A cornerstone of the Fair Housing Act is the concept of “disparate impact,” which says lending policies without a business necessity cannot have a negative or “disparate” impact on a protected group. H.U.D.’s proposed rule could make it much harder to prove disparate impact, especially stemming from algorithmic bias, in court.

“It creates huge loopholes that would make the use of discriminatory algorithmic-based systems legal,” Ms. Rice said.

H.U.D. says its proposed rule aligns the disparate impact standard with a 2015 Supreme Court ruling and that it does not give algorithms greater latitude to discriminate.

A year ago, the corporate lending community, including the Mortgage Bankers Association, supported H.U.D.’s proposed rule. After Covid-19 and Black Lives Matter forced a national reckoning on race, the association and many of its members wrote new letters expressing concern.

“Our colleagues in the lending industry understand that disparate impact is one of the most effective civil rights tools for addressing systemic and structural racism and inequality,” Ms. Rice said. “They don’t want to be responsible for ending that.”

The proposed H.U.D. rule on disparate impact is expected to be published this month and go into effect shortly thereafter.

Many loan officers, of course, do their work equitably, Ms. Rice said. “Humans understand how bias is working,” she said. “There are so many examples of loan officers who make the right decisions and know how to work the system to get that borrower who really is qualified through the door.”

But as Zest AI’s former executive vice president, Kareem Saleh, put it, “humans are the ultimate black box.” Intentionally or unintentionally, they discriminate. When the National Community Reinvestment Coalition sent Black and white “mystery shoppers” to apply for Paycheck Protection Program funds at 17 different banks, including community lenders, Black shoppers with better financial profiles frequently received worse treatment.

Since many Better.com clients still choose to talk with a loan officer, the company says it has prioritized staff diversity. Half of its employees are female, 54 percent identify as people of color and most loan officers are in their 20s, compared with the industry average age of 54. Unlike many of their competitors, the Better.com loan officers don’t work on commission. They say this eliminates a conflict of interest: When they tell you how much house you can afford, they have no incentive to sell you the most expensive loan.

These are positive steps. But fair housing advocates say government regulators and banks in the secondary mortgage market must rethink risk assessment: accept alternative credit scoring models, consider factors like rental history payment and ferret out algorithmic bias. “What lenders need is for Fannie Mae and Freddie Mac to come out with clear guidance on what they will accept,” Ms. McCargo said.

For now, digital mortgages might be less about systemic change than borrowers’ peace of mind. Ms. Anderson in New Jersey said that police violence against Black Americans this summer had deepened her pessimism about receiving equal treatment.

“Walking into a bank now,” she said, “I would have the same apprehension — if not more than ever.”

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Interest Rates Are Low, but Loans Are Harder to Get. Here’s Why.

As public school teachers, Tori Smith and her husband have careers that should survive the coronavirus economy, but their mortgage lender wasn’t taking any chances.

It told them that they would have to put down more money to keep the interest rate they wanted, then dialed back what it was willing to lend them. And Ms. Smith said it had checked their employment status several times during the approval process — and again a few days before the couple closed on their home in Zebulon, N.C., last month.

Ms. Smith said she had never gotten a straight answer about the new requirements, but she ventured a guess. “I felt like we had to bring more just because of Covid,” she said.

The economic crisis caused by the pandemic has driven interest rates to rock-bottom levels, meaning there has hardly been a better time to borrow. But with tens of million of people out of work and coronavirus infections surging in many parts of the country, qualifying for a loan — from mortgages to auto loans — has become more trying, even for well-positioned borrowers.

Lenders that have set aside billion of dollars for future defaults have also tightened their standards, often requiring higher credit scores, heftier down payments and more documentation. Some, such as Wells Fargo and Chase, have temporarily eliminated home equity lines of credit, while Wells Fargo also stopped cash-out refinancing.

It’s not unusual for lenders to tighten the credit reins during a downturn, but the current situation has made it especially challenging for them to get an accurate read on consumers’ financial health. Borrowers have been able to pause mortgages, halt student loan payments and delay paying their tax bills, while millions of households have received an extra $600 weekly in unemployment benefits. Those forms of government support could be masking an underlying condition.

“It makes it hard for a lender to understand what the consumer’s true state of credit quality is and their ability to pay back a loan,” said Peter Maynard, senior vice president of global data and analytics at the Equifax credit bureau.

Credit card companies, for example, mailed out 57 million offers to consumers in June, a historic low and down from 272 million a year earlier, according to Mintel, a research firm that has been tracking the offers since 1999. Some banks have stopped offering the types of cards that attract people who may be focused on paying down debt, such as BankAmericard, Mintel found.

Issuers are also being careful with cards belonging to current customers, said Mark Miller, associate director of insights for payments at Mintel.

“Some dormant accounts are being closed,” he said. “So if they have a credit card sitting in a drawer, those accounts are at risk of being closed, and credit lines with a $10,000 limit may eventually be knocked down to $8,000.”

For auto loans, borrowers with lower credit scores and thin credit histories face more rigorous requirements and less generous terms, including shorter loan periods.

“Subprime borrowers are not getting loans as readily as they were pre-pandemic or a year ago,” said Jonathan Smoke, chief economist at Cox Automotive, referring to consumers with credit scores below 620.

Interest rates for new and used vehicles remain low — below 4 percent at many banks and credit unions — but only for more qualified borrowers, said Greg McBride, chief financial analyst at BankRate.com.

“Good credit and a down payment are required to get the best rates, with weaker credit increasingly sidelined — particularly for older-model used car purchases,” he said.

Ford Motor said it hadn’t tightened standards on loans through its financing unit, but last month it introduced a program to make wary borrowers more comfortable. Those who buy or lease a car through Ford’s financing unit before Sept. 30 can return it within a year if they lose their jobs. Ford said it would reduce the customer’s balance by the vehicle’s book value, and then waive up to an additional $15,000.

If that measure is meant to stoke demand, no such program is necessary for home buyers.

For the first time in nearly half a century of tracking, 30-year fixed-rate mortgages averaged about 2.98 percent, according to Freddie Mac. The mortgage industry made $865 billion in loans during the second quarter, the highest amount since 2003, when quarterly originations twice topped $1 trillion, according to Inside Mortgage Finance, a trade publication.

And that’s with lenders being picky about their customers and particular about their requirements. JPMorgan Chase, for example, will make mortgages to new customers only with credit scores of 700 or more (up from 640) and down payments of 20 percent or higher. USAA has temporarily stopped writing jumbo loans, which are mortgages that are generally too large to be backed by the federal government, among other products. Bank of America said it had also tightened its underwriting, but declined to provide details.

Ms. Smith and her husband, Philip Ellis, had hoped to go through a first-time homebuyer program at Wells Fargo that would require them to put down 3 percent. They even sat through a required educational course. But two weeks before closing on their $205,000 home, their lending officer said they needed to put down 5 percent to keep their rate.

A week later, Ms. Smith said, they learned their loan was for less than what they had been preapproved for — and they needed to come up with an additional $4,000. In the end, their down payment and closing costs exceeded $14,000 — about 45 percent more than they had anticipated.

The couple, who had married in April, used money recovered from their canceled wedding reception. Ms. Smith said they were also lucky to have the support of their families, who fed and sheltered them so they could save every penny. But the stability of their jobs was also most likely a crucial factor.

“I think our ability to secure the loan was due to us both being schoolteachers and having a contract for employment already for the following year,” she said.

Wells Fargo said it hadn’t increased its credit score requirements, but it has raised down-payment minimums on certain loans not backed by the government because it had to suspend most interior appraisals of homes during the pandemic. Even under normal circumstances, there are a variety of situations in which borrowers may be asked to raise their down payment or obtain a better rate by doing so, a company spokesman said.

Some lenders also want to know more about borrowers’ other possible sources of cash.

When Chris Eberle, a technology executive, and his wife were locking in their jumbo mortgage for a new home in Palo Alto, Calif., their lender, a California mortgage bank, wanted to know not only how much they had in their retirement accounts but how easy it was to get at that money.

“They wanted, account by account, details on the withdrawal and loan options,” Mr. Eberle said.

And they, too, had to put down more than they had planned. Before the crisis, a jumbo loan could be had with 10 percent down. Mr. Eberle said they had to put down 20 percent — and found a cheaper house to make it easier.

Other borrowers, including the self-employed, are being asked to provide more detailed proof of their earnings — at least when they’re getting a loan that will be backed by Fannie Mae or Freddie Mac. .

“Employment and income verification for self-employed borrowers is now multiple times more detailed as it previously was,” said Ted Rood, a loan officer in St. Louis who lends nationally.

Income verification is also more rigorous across the board, and Mr. Rood said he was required to do two verifications over the phone. It makes sense, he said: He had just prepared a loan for a married couple — a gym owner whose income had suffered and his wife, a speech therapist with a seemingly more stable position because she was able to work with clients remotely.

“We were set to close on a Monday in early June,” said Mr. Rood, who was working at Bayshore Mortgage Funding, which is based in Timonium, Md., at the time. But when the loan processor called the wife’s employer the Friday before, the processor learned that the woman had been laid off.

The lender withdrew the loan.

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Mortgage Rates Drop Below 3% for First Time, Tempting Home Buyers

Home loans have never been cheaper, if you can find a willing lender.

The average rate on 30-year fixed mortgages has fallen below 3 percent for the first time, as the Federal Reserve’s recent efforts to pump trillions of dollars into financial markets to support the economy during the pandemic translate into lower consumer borrowing costs.

Freddie Mac’s nationwide survey of mortgage rates, released on Thursday, showed the average on a 30-year mortgage at 2.98 percent, the first time this key rate has fallen below 3 percent since the government-backed mortgage finance firm began publishing the data in 1971.

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It was the latest in a string of record-low readings for the cost of home loans, and a rare bright spot for the U.S. economy. Nearly 15 million jobs have disappeared since the coronavirus pandemic exploded in March. Gross domestic product is expected to contract in the second quarter more than it ever has before.

But for those who are still receiving a paycheck, the collapse in mortgage rates has suddenly made homeownership more affordable, analysts and economists say.

“If you have your job, you’ve got your financial house in order — gosh, this is a great time to go and buy a home because mortgage rates are dirt cheap,” said Frank Nothaft, chief economist at CoreLogic, a real estate research firm.

The public has noticed. Mortgage applications, which fell at the start of the pandemic, have bounced back to some of the highest levels since the 2008 housing bubble burst.

The vast majority have been for refinancings, which allow owners to cut their monthly housing payments, freeing up cash for spending elsewhere. But record-low rates are stimulating more activity from first-time home buyers, too.

“People are taking advantage of these low rates not only to refinance but also to buy homes,” said Laurie Goodman, co-director of the housing finance policy center at the Urban Institute. “You’ve got a lot of first-time home buyers in the queue who see this as their opportunity.”

The savings are real. For a mortgage in the amount of the national median home price, roughly $285,000, the decline in rates during the last year would save more than $100 a month in payments, and roughly $50,000 over the course of the loan. In higher-cost coastal areas, the savings can be far more substantial.

On Wednesday, the Fed’s anecdotal report of economic conditions across its 12 districts consistently spotlighted demand related to low mortgage rates as one of the few bright spots in the American business landscape.

“Low mortgage interest rates encouraged undecided buyers to ‘get off the fence,’” said the section of the Fed’s report prepared by its Cleveland branch. “Residential realtors suggested that demand for existing properties was robust as well, but a shortage of listings constrained sales.”

Such reactions from consumers is precisely the way monetary policy — in this instance, the Fed’s engineering of lower interest rates — is supposed to work, stimulating activity in rate-sensitive sectors of an economy in an effort to offset weakness elsewhere.

A boom in refinancing lowers expenses for homeowners, freeing up cash for other purchases. An increase in demand from new home buyers can spur activity in the home building industry, lifting employment in construction.

Analysts and economists say it’s too early to tell if a sustainable cycle of this sort is emerging. But at the very least, the Fed’s efforts to support the economy are having an effect.

“It would be troubling if the Fed had cut interest rates to zero and we were not seeing more demand for interest-rate-sensitive consumption,” said Ernie Tedeschi, an economist with Evercore ISI, a macroeconomic advisory firm. “So the fact that we are is a reassuring sign that at least a piece of monetary policy is working as intended.”

That said, the housing market is far from immune from the nation’s economic turmoil. CoreLogic data shows that a record-high level of mortgages — 3.4 percent — fell into delinquency in April, higher than during the worst of the 2008 crisis.

Such numbers have prompted some lenders to tighten their standards for new home loans, meaning that while average rates are at record lows, some potential borrowers are likely to pay more or find themselves unable to qualify.

“They’re looking at ways to tighten the credit a little bit to account for the fact that we don’t know what the risks are going forward with the economy and unemployment and potentially delinquencies,” said Guy Cecala, chief executive and publisher of Inside Mortgage Finance, a trade publication.

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Mortgage Relief Du

As the owner of a small marketing agency in central Florida, Edith Duran quickly found herself in a difficult spot as the coronavirus pandemic crippled the local businesses she counts as clients. She couldn’t draw her full salary in February, and by March, she was seeking relief on her mortgage.

She was allowed to pause her payments for three months starting in early April, but the company that handles her mortgage made a seemingly impossible request: Pay back the $4,450 in skipped payments on July 1.

“That is a lot of money to come up with all at once when we are struggling to get things aligned and get our lives back in order,” said Ms. Duran, who owes about $163,000 on her four-bedroom ranch in DeLeon Springs, Fla.

With unemployment soaring, millions of borrowers have flooded mortgage firms with requests to hit the pause button on their loans. Federal officials have made it possible for borrowers with government-backed mortgages to suspend their payments for up to a year without immediately paying it back. But about 30 percent of homeowners with mortgages are like Ms. Duran. Their loans are owned by banks or private investors and are not governed by the same rules.

“The main problem right now is mass confusion,” said Diane Thompson, a lawyer at the National Consumer Law Center. “Borrowers are getting forbearances, but maybe for not as long as they would like, and it isn’t really clear what will happen on the back end when they need to start repaying their mortgages.”

More than 4.6 million borrowers, holding about 9 percent of all mortgages, were in forbearance as of Tuesday, up from just 150,000 in early March, according to Black Knight, a real estate data and mortgage software firm. Housing counselors who are accustomed to assisting low- and moderate-income borrowers are also now helping professionals who never expected to be in this position. Some states have also put foreclosure moratoriums and other protections in place.

Many borrowers have at least been able to get a forbearance for three months, according to housing counselors across the country. But what happens after that — and the type of longer-term relief offered to borrowers — will be determined by what kind of loan they have and who owns it.

Borrowers “are safe right now, but this is just the Band-Aid effect,” said Katherine Peoples, founder and executive director of HPP Cares, a nonprofit consumer credit and housing counseling agency. “This is the calm before the storm.”

Nearly 70 percent of homeowners with mortgages have loans somehow supported by the federal government. Fannie Mae and Freddie Mac, two government-sponsored entities, buy many loans from lenders and package them into investments that are akin to government bonds. Other borrowers who often put less money down have their loans insured by the Federal Housing Administration. Because of the government’s involvement in those loans, regulators have laid out options available to borrowers who must skip payments, and in almost all cases they can push back what they owe until the home is sold or refinanced or when the loan term is up.

The situation is often murkier for borrowers, like Carla Knight of Queens, whose loans are held by private investors.

Until recently, Ms. Knight, 50, worked as a paraprofessional caring for mentally challenged children while they rode on a school bus that now sits idle. Her paycheck was reduced before she was laid off completely on May 4.

After her pay cut, Ms. Knight called her mortgage servicer, Mr. Cooper, which said it would provide a three-month forbearance on her $198,000 loan with a lump-sum payment due when she restarted payments.

She called again after she was laid off, and the servicer extended her forbearance to six months — but she’d still owe a lump-sum payment. Come September, Ms. Knight said, she would owe roughly $13,500. If she isn’t allowed to push that back, her only alternative is to pursue a loan modification, which could, for example, allow her to extend the length of her mortgage. But that’s a more complicated process and often requires an application.

The uncertainty is unsettling. Ms. Knight, who lives with her 13-year-old twins and granddaughter in a four-bedroom home, said she had asked the company if the payments could be tacked on to the end of her mortgage. “But they keep telling me they have modifications,” she said.

Mr. Cooper declined to comment on her specific situation. A spokesman for the company said that its customers were offered an initial 90-day forbearance, but that it would grant relief for up to a year upon request. The company also said it was offering customers options to pay back the money over time, similar to alternatives offered to borrowers with federally backed loans. Ultimately, however, loan investors determine the options available to customers after the forbearance period — and in which order those options are presented to customers.

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Credit…Stefano Ukmar for The New York Times

Borrowers with federally backed mortgages have more consistent terms. Those who can afford to restart paying should be presented with different ways to make up the skipped payments. They’ll be able to do it over time — say, six or nine months — while making their regular payments, or settle up when the loan term is up.

Even so, there has been confusion: A housing regulator had to release a statement in late April to make it clear that no lump-sum payment was required at the end of a borrower’s forbearance period. Some housing advocates say confusion has lingered, with homeowners whose mortgages are backed by the government still being told that they’d have to make lump-sum payments when they resumed their loans.

Wells Fargo is offering Allen Butler of Wheeling, Ill., who has a private loan, an option similar to those given to government-backed borrowers: He can push his payments to the back end of his mortgage.

Until recently, Mr. Butler worked as an M.R.I. sales rep with the same company for eight years. Though the process to recertify his unemployment benefits has been frustrating, he had little trouble receiving a forbearance.

“They were prepared for it,” said Mr. Butler, who lives in a four-bedroom townhouse with his wife and two sons, who are attending college. “We got a letter from Wells Fargo stating that we didn’t have to pay for three months or until July,” he said, “without any penalties or reporting us to the credit bureau.”

Wells Fargo said many of the loans it serviced were held in its own portfolio, which means it is not beholden to the terms of an agreement with private investors. The bank said it could suspend payments for up to a year and then, with its own loans, the borrower could tack the missing monthly payments to the end of the mortgage, without having to do anything else.

Whether a mortgage is backed by the government or another entity, the situation becomes more complicated for homeowners who still can’t afford their payments after the forbearance period. A more formal evaluation is necessary to modify their loan, which might, for example, extend the overall term to help them lower their payments. But if they have a private loan, a lot will depend on the terms with the private investor.

Ms. Duran, 44, is still waiting for the unemployment benefits she applied for the second week of April, but she is keeping a positive attitude. She’s also waiting to see if she’ll receive any assistance through federal relief programs for small-business owners.

In the meantime, she’s working with a financial counselor at GreenPath Financial Wellness, a nonprofit financial counselor in Farmington Hills, Mich., that has helped her trim her budget and inspired her to come up with new ways to increase her business revenue, like creating online marketing courses. The organization has also helped her consider strategies for dealing with her mortgage servicer, Select Portfolio Servicing.

The company did not respond to messages seeking comment. But according to a letter Ms. Duran shared with The New York Times, the servicer said it would “clearly communicate” with her about repayment options. One possibility, it said, was a deferral that would be due upon her loan’s maturity or when she paid off the mortgage.

That’s the kind of solution she’s hoping for, but when Ms. Duran called the servicer this week, she said, it told her that it would discuss further options only 30 days before the lump sum was due.

“This is my house,” she said. “It is really important that I don’t fall behind.”


If you are having trouble paying your mortgage or have already paused your monthly payments through a forbearance, here are some resources that may help:

  • A guide to mortgage relief options from the Consumer Financial Protection Bureau offers a tool to find out who owns your mortgage.

  • The Department of Housing and Urban Development offers a list of housing counselors on its website (or call 800-569-4287), and so does the Consumer Financial Protection Bureau. Counselors who are certified by HUD often offer their services free of charge because they receive funding from the government.

  • The National Housing Resource Center offers a directory of mortgage servicers. Servicers are generally supposed to contact you 30 days before your forbearance period ends to discuss your situation and your options. But if you don’t hear from them, or are concerned about what comes next, be proactive and call them.

  • Your state may be offering additional protections.

  • If you’re having a problem with your mortgage servicer, you can file a complaint with the Consumer Financial Protection Bureau. It will forward the complaint to the company and work to get a response, generally within 15 days.

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Protesting Without Gathering, Tenant Organizers Get Creative

The dented Honda minivan pulled onto the shoulder of Interstate 70, just outside downtown Kansas City, Mo. Jenay Manley, in the passenger’s seat, had brought along her sister and their children to protest the difficulty of paying rent during the coronavirus epidemic — #ProtectMOTenants read the paint on the windows. Less than three minutes later, a police car pulled up, and their attempt to make a statement from the roadside had become a potential act of civil disobedience.

The police told them that they would get a ticket if they didn’t move along. Ms. Manley left, frustrated. The police were “worried about our safety on the side of a highway,” she said later. “I’m worried about our safety in life. We are trying to bring awareness to the fact that people are going to be homeless.”

For weeks, civil rights activists around the country have grappled with a conundrum. With the economy shut down and tens of millions out of work, the energy for protest is high. Many are angry that black and Latino people are being disproportionately killed by the virus. They’re angry that service workers already struggling with bills were the first to lose their jobs. They’re angry that corporations are getting bailouts while small businesses wither.

It’s a moment that might otherwise give rise to demonstrations in the streets. Instead, people are generally shut in by government order, or simply fear getting within six feet of another human. There have been hashtags (#CancelRent) and email blasts and grainy video rallies, but those methods are more easily ignored by the bankers, landlords and elected officials whom demonstrations are designed to discomfort.

Seeking the coronavirus equivalent of Occupy Wall Street’s colonization of public parks almost a decade ago, organizers have been batting around approaches. Would dropping banners from office buildings make an impact if nobody is at work to see them? Are public gatherings worth the effort to tape 6-by-6 squares to space out the crowd — and would anyone abide by them?

“Direct action is so much about people putting their bodies on the line,” said John Washington, an organizer in Buffalo with People’s Action, a national network of local advocacy organizations. “In a way, Covid has stolen that.”

Some groups have tried to break through with car protests, like the Los Angeles caravan that honked horns outside Mayor Eric Garcetti’s house to call for a broad moratorium on evictions. In Minneapolis, a group called Inquilinxs Unidxs Por Justicia (United Renters for Justice), drove around U.S. Bank’s national headquarters calling for a rent and mortgage holiday. It didn’t back up much traffic, since downtown was empty.

But coronavirus restrictions could have some upside by forcing activist groups to get better at harnessing the power of the internet, said Maurice BP-Weeks, co-executive director of the Action Center on Race & the Economy and a veteran of the door-knocking approach to organizing.

“If you’re bringing new people into your movement right now, you’re doing it online,” Mr. Weeks said. “It’s a way to scale that we haven’t really seen before, and my hope is that we come out of it with better digital organizing and more creative tactics in general.”

The United States had a housing crisis long before the new coronavirus. In 2018, about a quarter of tenants — close to 25 million people — paid over half their income on rent, according to the Joint Center for Housing Studies at Harvard University. Now, with businesses closing and job losses growing, surveys showed that the number of tenants behind on this month’s rent is roughly twice the March level and that many are using credit cards and deferrals to put off monthly bills.

Having pushed eviction restraints and rent control ordinances to the top of many legislative agendas in recent years, tenants’ rights groups from New York to California are largely united behind a list of policy demands. They include a suspension of rent and mortgage payments for the duration of the crisis — that is, forgiveness of rents and house payments, with no back payments accruing — along with a ban on evictions and utility shut-offs, and emergency shelter for the homeless.

But they are struggling to find a galvanizing symbol that draws notice and inspires action. “It’s a crisis of imagination,” said Tara Raghuveer, director of KC Tenants, which organized the Interstate 70 protest.

The seeds of the protest began a month ago, when the group released its own petition for rent and mortgage suspension. The list was followed by a digital rally, and after a month of waiting for the state government to respond, the group was seeking a creative way to escalate.

It settled on having people station themselves at five-mile intervals along the 250-mile route between Kansas City and St. Louis — the width of Missouri. That way, people could travel safely in their own cars while maintaining solidarity with the messages painted on their cars. To mimic the feeling of being in a large group, KC Tenants created an audio track on its website with tenants’ voices and chants like: “What do we want? Rent Zero! When do want it? Now!” That way, everyone involved, even if alone, would hear the same sounds of protest.

Sitting on the shoulder of I-70 at noon sharp, Ms. Manley took out her iPhone and pressed play. Her van rocked as cars whizzed past while inside the car calls of “I believe that we will win” echoed from a portable speaker.

A 27-year-old single mother, Ms. Manley had gotten home at 7 that morning after working the night shift as a clerk in a gas station. She was tired but eager to protest and be heard, so she gathered her 6-year-old twins along with her sister and her sister’s two children, and they drove to their appointed place on the highway.

It was political as well as personal. To make the April rent, Ms. Manley got a donation from KC Tenants and sold plasma, along with an old washer and dryer and video games her children no longer played. She was still late with her payment, prompting the owners of her apartment complex to leave a note on her door saying they would file for eviction if she did not pay, she said.

The May bill will arrive soon, and she’s not sure how she’ll pay it. A statewide rent suspension would be a lifeline.

Two minutes 40 seconds into the protest recording, while Ms. Manley’s own voice telling a story of struggle came through the speaker, a police car pulled up behind the van, lights flashing. First, the officers told the passengers that they could remain on the side of the highway so long as they stayed in the van.

A few minutes later, two more police cars arrived. This time the officers told Ms. Manley that idling on the side of the highway was unsafe. If she refused to leave now, she’d be failing to obey a lawful order. Ms. Manley moved along, circled around an exit ramp and parked on the shoulder of a road, deliberating what to do.

Image

Credit…Christopher Smith for The New York Times
Image

Credit…Christopher Smith for The New York Times

“How do we continue to bring up our issues and speak truth to power if we can’t actually do anything?” she asked. “We’re trying to keep a safe distance, we’re trying to follow the regulations for Covid-19 and the stay-at-home order, and yet that’s still not enough.”

Ms. Manley called a lawyer who was advising the protesters, and who told them that if she went back on the interstate, she’d probably be arrested. Rather than go back, she decided to drive up and down the highway and hope that other drivers noticed the messages on her car. It wasn’t very effective, but it felt better than going home.

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Property Taxes Are Probably Still Due Despite Coronavirus

Everyone has three extra months to pay federal income taxes because of the financial pain caused by the coronavirus pandemic. But what about the real estate taxes on your home? Any flexibility on paying those?

Maybe. It depends on where you live, since property tax payments are governed by a patchwork of state and local rules.

Extra time to pay could help people struggling with furloughs or layoffs. The average property tax bill on a single-family home in 2019 was about $3,600, but average bills are three to five times higher in some areas of the country, including parts of New York, New Jersey and California, according to Attom Data Solutions, which tracks property trends.

It’s generally harder for local governments to postpone tax payments because they rely on the money — usually paid in lump sums once or twice a year — to finance essential services. And while the federal government has vast financing power, counties, cities and towns have limited reserves of cash and credit to fill budget gaps.

Cities and towns rely on property taxes to fund the very services that are heavily strained because of the virus, said Christiana McFarland, research director for the National League of Cities. “It’s a huge hit on their budgets,” she said.

Some governments have extended spring property tax deadlines by as much as a month because of the economic dislocations caused by the virus. Others are effectively providing extensions to people who need more time by waiving penalties for late payments.

“We’re seeing a wide range of responses,” said Teryn Zmuda, chief economist with the National Association of Counties.

The extensions help people who pay their property taxes directly. People whose property taxes are included in their monthly mortgage payment don’t benefit because the money is already collected in an escrow account. (People struggling with mortgage payments should contact their bank or loan servicer. Relief has been granted for federally backed mortgages and some other home loans.)

Fewer than half of the homeowners in the United States paid their property taxes with their mortgages in 2015, according to a report in 2018 by the Lincoln Institute of Land Policy. The majority either didn’t have a mortgage or had one that didn’t put their property taxes in escrow accounts. (The share of people paying property taxes through escrow accounts varied widely by state.)

Older people are much more likely to pay their property taxes directly; just 20 percent of homeowners 65 and older had escrow accounts, the report found.

In many areas, homeowners are still expected to make property tax payments by the usual deadlines despite the economic strain caused by the virus. For a variety of reasons, “it is more difficult to change property tax filing dates than to change income tax dates,” said Jared Walczak, director of state tax policy at the Tax Foundation, a nonprofit organization focused on tax policy.

Local governments, typically counties or cities, set property tax rates and collect the money. But payment deadlines are often dictated by state law, and changing them may require an act of the legislature — many of which are now in recess — or an executive order.

Property taxes are used to pay for public schools, public health and emergency services, trash pickup, water and sewer operations, road maintenance and libraries. More than two-thirds of counties rely on property taxes for more than one-quarter of their revenue, Ms. Zmuda said. And during the coronavirus crisis, she said, counties are funding increased public health services, spending far beyond what they budgeted.

Postponing receipt of property taxes can cause havoc with local budgets, Mr. Walczak said. Unlike income taxes, which are collected over time through regular payroll deductions and estimated tax payments, property taxes are typically paid all at once or perhaps in a few installments.

Officials are struggling to find a balance between their needs and residents’ newly straitened circumstances. A group of county and tax officials in California urged the state to stick to an April 10 property tax deadline. Allowing all homeowners and businesses more time to pay, they said, “will tip local governments into insolvency at a time when our residents need us the most.”

Counties, the group said, “will use all existing authority” to cancel penalties for homeowners and small businesses affected by coronavirus “on a case-by-case basis.”

In a statement on Saturday, Gov. Gavin Newsom of California praised the counties’ “commitment” to cancel penalties because of “demonstrated economic hardship” caused by the virus. “This is good news for Californians,” he said.

A spokesman for Mr. Newsom said on Thursday that his office was “looking into further actions as well.”

Taxpayer and business groups have urged the governor to extend the deadline by 90 days, arguing that applying for waivers is burdensome, and that counties may grant them inconsistently.

Florida has extended property tax deadlines statewide about two weeks, to April 15 from March 31, because of the virus. King County in Washington State, which includes Seattle, a city hit hard by the virus, has postponed its spring deadline by a month, to June 1. West Virginia approved a statewide one-month extension to May 1. San Francisco has moved its deadline from early April to May 4, when it expects a stay-at-home order to be lifted.

Some New York state and county officials have asked Gov. Andrew M. Cuomo to postpone May property tax deadlines. A request for comment sent to the New York governor’s office was forwarded to the State Division of the Budget. A division spokesman, Freeman Klopott, said Wednesday that the state was “open to discussing adjustments to those dates at the request of the impacted local taxing jurisdictions.”

New York City follows a different payment schedule. In a transcript of remarks on March 22, Mayor Bill de Blasio suggested that the city was unlikely to extend an April 15 city tax payment deadline for some homeowners, given “skyrocketing” expenses and “plummeting” revenue because of the coronavirus crisis. But he added, “We’re going to look at everything.”

Here are some questions and answers about paying property taxes:

What happens if I don’t pay my property taxes?

Failure to pay your property taxes can lead to financial headaches like penalties and interest and, eventually, more serious problems like a lien on your home. Local governments may auction delinquent properties to collect back taxes, or sell the liens to companies that, in turn, may foreclose. Some areas, however, have temporarily halted tax lien sales because of the coronavirus outbreak.

Are there programs that can help me if I can’t pay?

Even before the virus, most tax authorities offered programs that reduced property taxes for low-income, disabled or elderly people and veterans. Some also offer those suffering financial hardship the option to defer payment or arrange an installment plan.

“There’s a lot of variation in how flexible taxing authorities are,” said Sarah Bolling Mancini, a lawyer with the National Consumer Law Center.

To find out whether your local government has postponed payment deadlines, or for instructions on how to request a deferred payment or payment plan, contact your local tax collector or tax commissioner’s office. Some offices may be closed because of the virus, so it’s best to start by checking the agency’s website.

Can I challenge the assessment on which my property tax bill is based?

Yes, but usually you must do this well before the tax bill comes due. Most communities send property owners assessments months before bills are issued and set a deadline for appeals. If it is too late to appeal the assessment used to calculate your current tax bill, you can plan to challenge the assessment for next year.

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Big-Name Hotels Go Empty and Smaller Owners Are Hurt

It all started to fall apart for Vinay Patel about a week ago.The occupancy rates at the nine hotels he owns in the Northern Virginia area plummeted from about 50 percent to only a handful of rooms each night because of the coronavirus pandemic. He scrambled to cut costs. Floors …

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Racing to Head Off Evictions and Foreclosures

The financial shock from the coronavirus pandemic threatens the housing security of millions of Americans, prompting federal, state and local officials — and even judges and the police — to move quickly to ward off foreclosures and evictions.On Wednesday, the federal agency overseeing Fannie Mae and Freddie Mac, the giant government-run …

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Your Money: A Hub for Help During the Coronavirus Crisis

Image Credit…Robert NeubeckerIf your income has fallen or been cut off completely, we’re here to help. This guide will connect you to the basic information you’ll need to get through this, including on government benefits, free services and financial strategies.What you need to know:How unemployment …

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Will Mortgage Rates Stay Low During Coronavirus Crisis?

“Will mortgage rates remain low?”Probably, for the time being.It’s a question many homeowners, and potential home buyers, are asking. But with uncertainty rampant, thanks to turbulent financial markets and the spreading coronavirus, it’s hard to say for sure just how long they’ll stay rock bottom. …

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