Hidalgo’s directives buy time for tenants

Foreclosures delayed, but a major backlog might be on horizon

Harris County Judge Lina Hidalgo has been quietly postponing real estate foreclosures through executive orders, shutting downthe facilitywhere those auctions are held and providing relief to struggling homeowners.

Citing health concerns, Hidalgo has shut down the Bayou City Event Center on the first Tuesday of the month — the day foreclosure auctionsmust be held under state law — every month since April, with the exception of June. The moves, which make Harris County the only region in Texas where foreclosures have been effectively suspended since the pandemic, buy time for thousands of homeowners and commercial landlords to reach a deal with their loan servicers before losing their properties. It is also creating a backlog of properties in danger of foreclosure. An order canceling October’s foreclosure auctionwas signed on Sept. 24.

“The county’s official position is thatmass gatherings should not take place given the threat from COVID-19,” saidRafael Lemaitre, a spokesperson for Hidalgo’s office, in an email. “As a reminder, the county is still at its highest threat level — red — meaning that the spread is still at too high a rate for us to advise residents to gather in groups.”

If the auctions resume at the same time that a federal suspen

sion of foreclosures on government-backed mortgages comes to an end at the end of the year, “a substantial flood of foreclosed property” could hit the Harris County real estate market in 2021, according to Amanda LeCureux of the Foreclosure Information and Listing Service.

The service was already forecasting 2,000 to 3,000 Harris County foreclosure listings a month when government protections end Dec. 31, three times the monthly number of foreclosures before the pandemic. On top of that, a backlog ofmore than 3,500 properties had been posted for auctions that have been canceled during the pandemic.

Still, Jim Gaines, chief economist of the Real Estate Center at Texas A&M University, said the impact will be nowhere near that of the foreclosures that happened during the Great Recession, when for a time foreclosures eclipsed 4,000 postings a month.

“The numbers just aren’t as big,” he said. “I think we’re going to see a temporary impact on the housing market. What we’ll also see is a lot of institutional buyers come in and try to buy the quote-unquote distressed sales.”

Falling through cracks

Some homeowners may be able to use the delay in proceedings to communicate with the companies servicing their mortgages to find an alternative to foreclosure. The CARES Act, passed by Congress in March, allows homeowners with governmentbacked mortgages to temporarily reduce or pause monthly payments, a process knownas forbearance.

Despite the options created by the CARES Act, many are still falling through the cracks, data shows.

More than 8 million homeowners nationwide are behind on their monthly mortgage payments, according to the most recent Census Bureau Household Pulse Survey; more than 1 million are at least 30 days late, according to data from real estate analytics company Black Knight.

Misconceptions, a lack of awareness and, in Houston, bad experiences with mortgage relief programs after Hurricane Harvey have led to the pitfall, housing counselors said.

Diane Jasso, who provides free housing counseling with Avenue Community Development Corp., explained that many Houstonians are wary of forbearance because of the way it was rolled out after Harvey. Homeowners impacted by the natural disaster were allowed to pause payments on their mortgages for six months, but all six months’ worth of payments were due in a lumpsumpayment when the period came to an end.

“A lot of people took forbearance during the disaster, and a lot of people had a bad experience,” she said. “So they knew there was the possibility they could lose their home.”

There are key differences between forbearance provided by the CARES Act and forbearance in the wake of Harvey.

Homeowners experiencing financial stress because of COVID-19 whose mortgages are backed by the federal government are protected from lump-sumpayments if they would prefer to make other arrangements. Those can include a repayment agreement that involves making up the missed payments over time; a partial claim, which involves making up the missed payments at the end of the loan; or a modification, which may change the interest rate or number of years the mortgage will last. A housing counselor approved by the Department of Housing and Urban Development will be familiar with the options and can provide free guidance to homeowners on how to communicate with their servicers.

Firms included

Hidalgo’s order also affects commercial properties, which are not protected by the CARES Act. In the county, 241 commercial properties, including an apartment complex with a $23 million loan, a shopping center with a $21 million loan and an office building with an $80 million loan, have not been foreclosed on due to the cancellations.

Neale Shields, who is representing a lender in a foreclosure auction on a shopping center backing a $10 million loan, has been prevented from selling the property at auction for months. So far, he says the main impact has been the costs involved in filing for foreclosure and notifying the necessary parties for four months in a row.