Jevone Moore/Image of Sport via AP
An apartment complex in Los Angeles. Homeowners have received more relief in this crisis than renters.
First Response
I’m not really a fan of April 1 in general, with its rollout of amateur comedians and brand social media campaigns. But I’m really not a fan of this April 1, the first day since the coronavirus crisis really rocked America that most residential and commercial rents and mortgages are due. This is the biggest financial expense for most ordinary people and businesses. None of the relief in the $2.2 trillion survival aid package passed last week has gone out the door. And many have spent several weeks without salaries or revenues; those in the underground or cash economies will likely get little or no relief.
The CARES Act does include some protections for borrowers and renters, though it does show the particular biases in our politics. Foreclosures on “federally-backed loans” (defined broadly, that’s about two-thirds of all mortgages, though it could be as low as 20 percent by other counts) are supposed to be frozen for 60 days, and homeowners can obtain up to one year of forbearance, where payments are suspended and tacked on the back end. Landlords that seek forbearance on their multi-family properties cannot evict their tenants, which is a solid protection. Many states have also implemented various foreclosure moratoria and mortgage forbearance protections, listed here. Here’s an example: New Jersey Governor Phil Murphy announced a 90-day grace period on mortgage payments for those affected by the crisis, without fees.
The eviction protections, outside of the one for tenants of landlords seeking federal relief, are a bit more limited. The CARES Act has a 120-day protection against evictions (so until the end of July), with a 30-day notice after that, for all “covered dwellings” secured by a federally-backed loan. That’s a fairly small universe. California, Kentucky, Minnesota, Oregon, Washington state, and Washington D.C. (UPDATE: and New York) have all suspended evictions to varying degrees, along with several localities. Finding any forbearance on rents is much, much harder, as opposed to mortgages. So whenever the various eviction suspensions lift, landlords can take those properties if renters are delinquent. New York City real estate officials estimate that 40 percent of their tenants won’t be able to make rent this month; millions across the country are in the same position.
People with mortgages vote, and renters don’t at the same level, and I think it’s as simple as that, an inequality issue that runs throughout our politics. Tenant advocates have counseled renters to individually work out payment plans with their landlords, as governments work out forbearance plans with mortgage companies at a higher level.
Others have been more militant. Right to the City Alliance, a national coalition of renter activists, have a national day of action today, pressuring cities to cancel rent, mortgage, and utility payments for the duration of the crisis and a three-month “recovery period” after that. “The stimulus package check that politicians are lifting up as a solution doesn’t even cover one month’s rent in most cases,” said Coya Crespin, a single parent from Portland, Oregon, who added that she was barely keeping her kids fed during this time. “People are beyond stressed. I’m beyond stressed.” It’s difficult to rally, so the organization is holding a “digital rally” with a call-in to state and local legislators. Musician Aloe Blacc is part of an online music festival associated with the campaign. (UPDATE: Some tenants throughout the country are going on rent strikes.)
There’s bound to be a ripple effect to these lack of payments of mortgages and rents (and property and real estate taxes, which are staggered throughout the states). “The mortgage finance system could collapse,” blares one Politico story (that’s about bottom-feeding mortgage servicing companies, who nobody should shed a tear for). There are mortgage-backed securities—albeit at a much lower level than in the financial crisis—that could fail to deliver for investors. Originators have stopped issuing mortgages, another part of the system that has seized up. The house flippers are out of the game. A lot of our economic architecture is tied up in property, and therefore might tumble.
One thing I’m thinking about is the property records system, which is natural since I wrote a whole book about it. Nothing was really done to fix that system after the foreclosure crisis; it was just broadly waved through, depending on judicial disposition. We still have MERS, the private database registry. A lot of the really bad loans that required all the falsifying of documents have been flushed through the system. But there’s still plenty of confusion in mortgage documentation, plenty of hide-the-ball from the mortgage companies. As the forbearance runs out and the foreclosures are allowed, we could see another round of fakery.
Vital Stats
As of this morning, the New York Times shows 188,247 U.S. cases (163,575 yesterday) and 3,921 deaths (3,073). Johns Hopkins University shows 189,633 cases (164,719) and 4,081 deaths (3,170), with over 1,000 in New York City alone. The surge in deaths now puts the toll above Pearl Harbor, and the White House put the ultimate, gruesome figure between 100,000 and 240,000—if we all practice rigid social distancing for an indeterminate period. That distancing does appear to be bending the curve a bit in Washington state and parts of California, though let’s hope that holds.
The COVID-19 Tracker shows 187,077 cases (162,399) and 3,832 deaths (2,981), with 1,059,209 tests completed (956,481 yesterday). Testing growth has stalled out, and that’s probably affecting the stalled increase in cases. The death surge is telling more of the story now. The hospitalization tracker backed off its peak by one day to April 16, and sees a shortage on peak usage day of 84,671 beds (previously 54,046), 18,905 ICU beds (previously 13,856), and 31,082 ventilators (26,381).
Over at The Prospect
We have a set of stories today looking at the hidden victims, the quiet sufferers of the COVID-19 crisis:
David Bacon has a powerful portrait of farmworkers, many undocumented, ineligible for CARES Act relief and working “essential” jobs that are not conducive to social distancing.
Marcia Brown talks to a senior ACLU attorney about ICE detention centers, breeding grounds for COVID-19.
Chris May describes how prison phone companies are offering “free” calls but maneuvering to squeeze a little extra money out of them simultaneously.
Meanwhile, Alex Sammon explains how we apparently elected Steve Mnuchin to run the economy now.
Another essential piece comes from Jules Bernstein, who explains that workers who fear catching COVID-19 have a legal right to walk out of hazardous workplaces without fear of reprisal.
All of our COVID-19 coverage is at prospect.org/coronavirus.
The Real Victims
Let’s take a moment of silence in honor of the private equity industry, which is scrambling after a provision tucked into the CARES Act may nullify their portfolio companies from getting small business grants. The definition of a small business in the bill includes firms with 500 employees or less, but that counts “affiliates,” which could mean that all companies in a private equity portfolio would be seen as one business, too large for the forgivable loans.
The industry is freaking out about this: “We see no reason why being owned in a fund structure should result in these businesses having less access to the capital needed to keep their employees on the payroll,” wrote the American Investment Council in a letter to administration officials. Well, one reason for that would be that private equity is sitting on trillions of dollars of cash and could easily boost their own portfolio companies with the necessary funds. But that would involve the investor class taking a hit, and we can’t have that.
Meanwhile, the industry should calm down. First, private equity-owned hotel and travel companies are explicitly exempt from this restriction. And hotels in particular are eligible even if they have multiple locations, as long as 500 or less people work at each one. Second, there appears to be an ownership threshold that private equity can maneuver around. If the ownership is below 20 percent, they will be exempt from this definition. You could potentially see coalitions of ownership emerge, all below that threshold. If the ownership is between 20 and 50 percent, the Small Business Administration would have some wherewithal to determine the resolution.
On top of that, you may be aware that private equity has some political juice. If they don’t lobby the SBA to change the definition, they could get a change tucked into the fourth survival aid package. Maybe SBA will stay strong and tell well-stacked private equity firms to finance their own bailout. But Congress is likely to be less firm on that point. Plus, private equity still has all that cash to deploy. The message on one call from a top private equity firm that was relayed to me was this: still has all that cash to deploy. The message on one call from a top private equity firm that was relayed to me was this: “Stash Cash. Wait to see who lives and who dies. Then scoop up Stash Cash. Wait to see who lives and who dies. Then scoop up companies.”
Today I Learned
- Brilliant piece on how offshoring and concentrated supply chains added hidden risk that we’re now starting to see. (Wired)
- Resumptions of the outbreak in Asia could signal a very long crisis. (New York Times)
- Will wind and solar farms suddenly be seen as responsible, solid investments? (Wall Street Journal)
- America’s worst person, Michael Bloomberg, not only laid off staff during a pandemic when he’d promised jobs until November, but he stuck them with the tax bill for phones and laptops he provisioned them. (Political Wire)
- Is this the end of benefit discrimination against the poorest people? (HuffPost)
- Tragic story of an outbreak at a choir practice. (Los Angeles Times)
