Homeowner Assistance Fund Backstopped Vulnerable Borrowers, Study Finds

A new report from the Mortgage Bankers Association’s (MBA) Research Institute for Housing America (RIHA), MBA’s 501(c)(3) trust fund that supports independent research on housing finance and policy, found that while pandemic-era forbearance helped most borrowers avoid foreclosure, the federal Homeowner Assistance Fund (HAF) became a critical backstop for more vulnerable homeowners who needed help beyond traditional loss mitigation.

The study, released Tuesday, examines the $10 billion federal program created in 2021 to assist homeowners affected by COVID-19 and analyzes how HAF dollars were distributed nationwide, how states implemented their programs and the characteristics of borrowers who received assistance.

By the end of 2021, more than 80% of borrowers who entered pandemic forbearance had exited and either resumed payments or paid off their loans, according to the report. Those who continued to struggle often turned to HAF, which was designed to supplement – not replace – existing forbearance and loss mitigation options.

“There has been a lot of attention to COVID-19 era mortgage forbearance policies that are now a permanent part of the loss mitigation waterfall for homeowners with federally backed mortgages,” said Dr. Stephanie Moulton, professor and associate dean for faculty and research at the John Glenn College of Public Affairs at The Ohio State University. “This is the first study to examine the $10 billion HAF program and the homeowners who benefited. The insights from this report help us think about potential gaps in the loss mitigation waterfall and the types of homeowners who may benefit from targeted support when they experience a crisis.”

HAF dollars highly targeted to lower-income households

The RIHA report finds that HAF dollars were highly targeted to lower-income and financially distressed households. More than 90% of HAF funds nationwide went to homeowners with incomes below their area median income.

Beneficiaries were concentrated in communities hit hardest by the pandemic, with higher unemployment and higher mortgage delinquency rates. While most funds were used to cure past-due or cover future mortgage payments, programs also paid non-mortgage housing costs including utilities and property taxes.

HAF assisted not only traditional first-lien mortgages but also reverse mortgages, land contracts and loans with complex title situations securing a principal residence.

For servicers and housing counselors, the data underscores that HAF effectively reached borrowers at the margins of the standard servicing system – including those with non-traditional financing structures and those whose housing costs went beyond the first mortgage payment.

Ohio homeowners studied

The report includes a detailed comparison of Ohio homeowners who received COVID-era mortgage forbearance and those who received HAF, either in addition to or instead of forbearance. More than one in 10 of the roughly 100,000 Ohio homeowners with mortgages at year-end 2019 who later received assistance for missed mortgage payments during the pandemic used HAF in addition to or instead of forbearance.

About 16% of Ohio HAF recipients had previously received mortgage payment forbearance before getting HAF support. Ohio homeowners in forbearance disproportionately held government-backed FHA, VA or GSE loans, consistent with the reach of federal loss mitigation programs.

About one-third of Ohio homeowners receiving HAF assistance had no evidence of a mortgage on their credit file, suggesting use of nontraditional financing, heirs’ property or other complex ownership structures.

Among Ohio homeowners receiving HAF for non-mortgage expenses, 80% had no mortgage appearing on their credit file.

For servicers operating in states with similar HAF designs, the Ohio findings point to a distinct population that may not surface through traditional credit file or agency-loan channels but still faces homeownership instability.

The RIHA research positions HAF as a complement to the now-standard loss mitigation waterfall that emerged during the pandemic. Broad-based tools like across-the-board forbearance stabilized the mortgage market, while HAF addressed more idiosyncratic or structural barriers that forbearance alone could not solve.

“Pandemic-era housing policy interventions proved highly effective in stabilizing the mortgage market and helping the vast majority of homeowners avoid foreclosure during an unprecedented economic shock,” said Edward Seiler, executive director of RIHA and MBA’s associate vice president, housing economics. “The research highlights not only the success of broad-based relief efforts like forbearance, but also the critical role of targeted programs such as the Homeowner Assistance Fund in supporting more vulnerable borrowers. As we look ahead, these findings offer important lessons for how policymakers and industry stakeholders can respond to future economic disruptions while promoting sustainable homeownership.”

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