Mortgage Forbearance and Other Federal Efforts Have Reduced Default and Foreclosure Risks (GAO-21-554)

Summary

A GAO report to congressional committees, GAO-21-554, dated July 2021, on COVID-19 housing protections. It explains that the CARES Act's expanded mortgage forbearance provision allowed borrowers with loans insured, guaranteed, made directly, purchased or securitized by federal entities, about 75 percent of all mortgages, to temporarily suspend their monthly payments. GAO reports that many single-family borrowers who missed payments during the pandemic used the provision, and that its use peaked in May 2020 at about 7 percent of all single-family mortgages. Its title states that mortgage forbearance and other federal efforts have reduced default and foreclosure risks.

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United States Government Accountability Office
Report to Congressional Committees

COVID-19 HOUSING
July 2021

PROTECTIONS

Mortgage
Forbearance and
Other Federal Efforts
Have Reduced
Default and
Foreclosure Risks

GAO-21-554
July 2021

COVID-19 HOUSING PROTECTIONS
Mortgage Forbearance and Other Federal Efforts
Have Reduced Default and Foreclosure Risks
Highlights of GAO-21-554, a report to
congressional committees

Why GAO Did This Study What GAO Found
Millions of mortgage borrowers Many single-family mortgage borrowers who missed payments during the
continue to experience financial pandemic used the expanded mortgage forbearance provision in the CARES Act.
challenges and potential housing This provision allowed borrowers with loans insured, guaranteed, made directly,
instability during the COVID-19 purchased, or securitized by federal entities (about 75 percent of all mortgages)
pandemic. To address these concerns, to temporarily suspend their monthly mortgage payments. Use of the forbearance
Congress, federal agencies, and the provision peaked in May 2020 at about 7 percent of all single-family mortgages
enterprises provided borrowers with (about 3.4 million) and gradually declined to about 5 percent by February 2021,
options to temporarily suspend their according to GAO’s analysis of the National Mortgage Database. As of February
mortgage payments and placed a
2021, about half of all borrowers who used forbearance during the pandemic
moratorium on foreclosures. Both
remained in forbearance. In addition, Black and Hispanic borrowers, who were
provisions begin to expire in the
coming months.
more likely to have been economically affected by the pandemic, used
forbearance at about twice the rate of White borrowers. Forbearance was also
The CARES Act includes a provision more common among borrowers at a greater risk of mortgage default—
for GAO to monitor federal efforts specifically, first-time, minority, and low- and moderate-income homebuyers with
related to COVID-19. This report mortgages insured by the Federal Housing Administration and rural homebuyers
examines (1) the extent to which with loans guaranteed by the Rural Housing Service (see fig. 1).
mortgage forbearance may have
contributed to housing stability during Figure 1: Estimated Percentage of Single-Family Mortgage Loans in Forbearance, by Loan
the pandemic, (2) federal efforts to Type (January 2020–February 2021)
promote awareness of forbearance
among delinquent borrowers, and (3)
federal efforts to limit mortgage default
and foreclosure risks after federal
mortgage forbearance and foreclosure
protections expire.
GAO analyzed data on mortgage
performance and the characteristics of
borrowers who used forbearance from
January 2020 to February 2021 using
the National Mortgage Database (a
federally managed, generalizable
sample of single-family mortgages).
GAO also reviewed data from Black
Knight and the Mortgage Bankers
Association on foreclosures and A small percentage of borrowers who missed payments during the pandemic
forbearance repayment. In addition, have not used forbearance—less than 1 percent of those covered by the CARES
GAO interviewed representatives of Act. Yet, borrowers who have not used forbearance may be at a greater risk of
federal entities about efforts to default and foreclosure, according to GAO’s analysis of the National Mortgage
communicate with borrowers and limit Database. For example, these borrowers tended to have lower subprime credit
default and foreclosure risks. To
scores, indicating an elevated risk of default, compared to borrowers who were
highlight potential risks, GAO also
current or in forbearance, who tended to have higher prime or near prime credit
analyzed current trends in home equity
among delinquent borrowers relative to scores. Federal agencies and the government-sponsored enterprises Fannie
the 2007–2009 financial crisis. Mae and Freddie Mac (the enterprises) have taken steps to make these
borrowers aware of forbearance options, such as through direct phone calls and
letters. In addition, the Consumer Financial Protection Bureau (CFPB) amended
View GAO-21-554. For more information, mortgage servicing rules in June 2021 to require servicers to discuss
contact John Pendleton at (202) 512-8678 or
PendletonJ@gao.gov. forbearance options with borrowers shortly after any delinquency.

United States Government Accountability Office
Highlights of GAO-21-554 (Continued)

Foreclosures declined significantly during the pandemic because of federal moratoriums that prohibited foreclosures. The
number of mortgages entering foreclosure decreased by about 85 percent on a year-over-year basis from June 2019 to
June 2020 and remained as low through February 2021, according to mortgage data provider Black Knight (see fig. 2).
Figure 2: Number of Single-Family Mortgage Loans Entering Foreclosure, by Month (June 2019–February 2021)

Note: Foreclosure data were only available through February 2021 at the time of our review. The number of new foreclosures includes vacant and
abandoned properties and non-federally backed loans, which the CARES Act did not cover.

Federal entities have taken additional steps to limit pandemic-related mortgage defaults and foreclosures. Federal housing
agencies and the enterprises have expanded forbearance options to provide borrowers with additional time to enter and
remain in forbearance. In addition, they streamlined and introduced new loss mitigation options to help borrowers reinstate
their loans after forbearance, including options to defer missed payments until the end of a mortgage. Borrowers in
extended forbearances generally have large expected repayments—an average of $8,300 as of February 2021, according
to the National Mortgage Database. As a result, delinquent borrowers exiting forbearance have most commonly deferred
repayment, according to the Mortgage Bankers Association. Further, CFPB’s amended mortgage servicing rules allow
servicers to streamline processing of loss mitigation actions and establish procedural safeguards to help limit avoidable
foreclosures until January 1, 2022.
The risk of a spike in defaults and foreclosures is further mitigated by the relatively strong equity position of borrowers due
to rapid home price appreciation. Home equity—or the difference between a home’s current value and any outstanding
loan balances—can help borrowers with ongoing hardships avoid foreclosure by allowing them to refinance their mortgage
or sell their home to pay off the remaining balance. According to GAO’s analysis of the National Mortgage Database, few
borrowers (about 2 percent) who were in forbearance or delinquent in February 2021 did not have home equity after
accounting for home price appreciation. By comparison, during the peak of foreclosures in 2011 after the 2007–2009
financial crisis, about 17 percent of all borrowers and 44 percent of delinquent borrowers had no home equity (see fig. 3).
Figure 3: Estimated Percentage of Single-Family Mortgage Borrowers without Home Equity as of 2020 and 2011, by Loan Type and Status
Contents

Letter 1
Background 3
Mortgage Forbearance Has Been Widely Used, Especially among
Higher-Risk Borrowers 9
Agencies and Enterprises Have Promoted Awareness of
Mortgage Forbearance among Delinquent Borrowers 16
Foreclosures Have Declined during Moratoriums, and Agencies
and Enterprises Have Taken Steps to Further Limit Default and
Foreclosure Risks 22
Agency Comments 34

Appendix I Objectives, Scope, and Methodology 37

Appendix II GAO Contacts and Staff Acknowledgments 42

Figures
Figure 1: Role of the Federal Government and Mortgage Servicers
in the Primary and Secondary Mortgage Markets 6
Figure 2: Percentage of Mortgage Loans in Forbearance by Loan
Type, January 2020–February 2021 11
Figure 3: Percentage of Mortgage Borrowers in Forbearance by
Race and Ethnicity, January 2020–February 2021 12
Figure 4: Number of Mortgage Loans Entering and Exiting
Forbearance, March 2020–February 2021 13
Figure 5: Mortgage Borrowers Generally Had Lower Incomes and
Higher-Risk Financial Characteristics the Longer Their
Loans Were in Forbearance, March 2020–February 2021 15
Figure 6: Percentage of Mortgage Loans That Were Behind Two
or More Payments and Not in Forbearance, by Loan
Type, January 2020–February 2021 17
Figure 7: Distribution of Credit Scores among Mortgage Borrowers
by Delinquency and Forbearance Status, as of February
2021 18
Figure 8: Number of Mortgage Loans Entering Foreclosure, by
Month (June 2019–February 2021) 23
Figure 9: Number of Mortgage Loans in Forbearance and Length
of Delinquency, April 2020–February 2021 25

Page i GAO-21-554 COVID-19 Housing Protections
Figure 10: Percentage of Mortgage Borrowers Who Have Exited
Forbearance by Disposition Status, June 2020–February
2021 29
Figure 11: Percentage of Mortgage Borrowers without Home
Equity as of 2020 and 2011, by Loan Type and Loan
Status 33

Abbreviations

CFPB Consumer Financial Protection Bureau
COVID-19 Coronavirus Disease 2019
enterprises government-sponsored enterprises (Fannie Mae
and Freddie Mac)
FHA Federal Housing Administration
FHFA Federal Housing Finance Agency
HUD Department of Housing and Urban Development
RHS Rural Housing Service
VA Department of Veterans Affairs

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Page ii GAO-21-554 COVID-19 Housing Protections
Letter

441 G St. N.W.
Washington, DC 20548

July 12, 2021

Congressional Committees

The Coronavirus Disease 2019 (COVID-19) pandemic has resulted in
significant turmoil in the U.S. economy and left many citizens without
stable employment income. As a result, millions of U.S. homeowners
have experienced ongoing challenges meeting their mortgage payments,
which has increased mortgage default and foreclosure risks. In the early
months of the pandemic, an estimated 15 percent of mortgage borrowers
reported slight or no confidence in their ability to make their next
mortgage payment. 1

To address these risks, Congress passed the CARES Act in March 2020,
which provided over $2 trillion in emergency assistance and health care
response for individuals, families, and businesses affected by COVID-19. 2
The CARES Act included several provisions intended to promote housing
stability among single-family mortgage borrowers, including expanded
mortgage forbearance and a moratorium on foreclosures for federally
backed properties. 3

As the COVID-19 pandemic persisted, federal entities took additional
steps to assist mortgage borrowers. Specifically, federal agencies that
insure and guarantee mortgages, including the Federal Housing
Administration (FHA), Rural Housing Service (RHS), and Department of
Veterans Affairs (VA) (collectively, the agencies), as well as the
government-sponsored enterprises Fannie Mae and Freddie Mac
(enterprises) extended options for eligible borrowers to enter and remain

1Census Bureau, Measuring Household Experiences during the Coronavirus Pandemic:
Household Pulse Survey – Phase 1 (April 23–May 5). This estimate had a margin of error
of about ± 1 percentage point at the 95 percent confidence level.
2Pub. L. No. 116-136, 134 Stat. 281 (2020).

3Pub. L. No. 116-136, div. A, § 4022, 134 Stat. at 490. Federally backed mortgages are
those that federal entities insure, guarantee, directly originate, purchase, or securitize.
Single-family properties are those with 1–4 dwelling units. The CARES Act also included a
forbearance option for multifamily properties (5 or more units). Pub. L. No. 116-136, div. A
§ 4023, 134 Stat. at 491. For more information on multifamily forbearance, see GAO,
COVID-19 Housing Protections: Moratoriums Have Helped Limit Evictions, but Further
Outreach is Needed, GAO-21-370 (Washington, D.C.: Mar. 15, 2021).

Page 1 GAO-21-554 COVID-19 Housing Protections
in forbearance. 4 They also extended the foreclosure moratoriums through
July 31, 2021. 5 In addition, the agencies and enterprises enhanced
options for borrowers to repay missed payments after their forbearance
ends, or to modify or refinance their loans if they continue to experience
financial challenges.

The CARES Act includes a provision for us to monitor and oversee the
federal government’s efforts to prepare for, respond to, and recover from
COVID-19. 6 This report examines (1) the extent to which mortgage
forbearance may have contributed to housing stability during the
pandemic, (2) what efforts federal agencies and the enterprises have
taken to promote awareness of mortgage forbearance among delinquent
borrowers, and (3) what efforts federal agencies and the enterprises have
taken to limit mortgage default and foreclosure risks after federal
mortgage forbearance and foreclosure protections expire.

To examine how mortgage forbearance may have contributed to housing
stability during the pandemic, we reviewed and analyzed data on
mortgage forbearance, delinquency, and borrower demographics from the
National Mortgage Database (a federally sponsored database of first-lien
mortgages), Black Knight (a mortgage data provider), Mortgage Bankers
Association (an industry group representing the real estate finance

4The CARES Act allowed single-family mortgage borrowers to suspend their payments for
up to 12 months and did not include a deadline for starting forbearance. The agencies and
enterprises extended this provision to allow borrowers to remain in forbearance for up to
18 months depending on when they started or requested their initial forbearance.
Borrowers with agency loans can request an initial CARES Act forbearance through
September 30, 2021, while borrowers with enterprise loans do not have a deadline
because they can continue to use forbearance options that were in place prior to the
CARES Act, according to FHFA officials.
5The CARES Act prohibited certain foreclosure activities for not less than the 60-day
period beginning on March 18, 2020. Thereafter, the agencies and enterprises initiated
separate foreclosure moratoriums, which they have coordinated to extend through July 31,
2021.
6Pub. L. No. 116-136, div. B, § 19010, 134 Stat. 281, 579-81 (2020). We regularly issue
government-wide reports on the federal response to COVID-19. For the latest report, see
GAO, COVID-19: Sustained Federal Action Is Crucial as Pandemic Enters Its Second
Year, GAO-21-387 (Washington, D.C.: Mar. 31, 2021). Our next government-wide report
will be issued on July 19, 2021 and will be available on GAO’s website at
https://www.gao.gov/coronavirus.

Page 2 GAO-21-554 COVID-19 Housing Protections
industry), and the federal agencies and enterprises. 7 We generally
analyzed and reported data from January 2020–February 2021, covering
the onset of the pandemic through the most recent month for which
updated data were available from National Mortgage Database for our
reporting purposes. To inform and address all objectives, we also
reviewed documentation from and interviewed officials from Fannie Mae,
Freddie Mac, FHA, RHS, VA, Consumer Financial Protection Bureau
(CFPB) and Federal Housing Finance Agency (FHFA). See appendix I for
additional information on our objectives, scope, and methodology.

We conducted this performance audit from May 2020 to June 2021 in
accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe the
evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.

Background
Role of the Federal Mortgage forbearance and foreclosure protections in section 4022 of the
Government and CARES Act covered federally backed mortgage loans. 8 Federal backing
Mortgage Servicers in refers to whether a loan has been insured, guaranteed, originated
directly, purchased, or securitized by a federal entity. According to Black
Mortgage Markets Knight, at least 75 percent of all active single-family mortgages are
backed by federal entities in either the primary or secondary mortgage
markets.

In the primary mortgage market, where lenders originate mortgage loans
to borrowers to purchase homes, the federal government—through FHA,
RHS, and VA—operates mortgage insurance and guarantee programs to
promote homeownership for certain types of borrowers. Specifically, FHA-
insured loans target low-income and first-time homebuyers; RHS-

7For the purposes of this report, we categorized mortgage delinquency as loans that were
60 or more days past due and not in forbearance, foreclosure, or bankruptcy. We
assessed the reliability of these data by interviewing knowledgeable officials, conducting
data testing, and reviewing supporting documentation. We found these data to be
sufficiently reliable for determining mortgage performance trends and the characteristics of
associated borrowers.
8Pub. L. No. 116-136, div. A, §§ 4022(a)(2). Mortgage forbearance allows mortgage
borrowers to temporarily suspend or reduce their mortgage payments without penalty.

Page 3 GAO-21-554 COVID-19 Housing Protections
guaranteed loans target low- and moderate-income rural homebuyers;
and VA-guaranteed loans target eligible servicemembers and veterans of
the U.S. armed forces and their surviving spouses. 9 Federal insurance
and guarantee programs encourage lenders to make mortgages available
to these borrowers with little or no down payment compared to a
conventional mortgage (those not insured or guaranteed by the federal
government) by protecting lenders against potential losses. 10 Credit risk,
or the risk that a borrower will default on the mortgage by failing to make
timely payments, generally increases as the mortgage’s loan-to-value
ratio increases.

In the secondary mortgage market, the enterprises purchase and
securitize mortgages to promote the liquidity, stability, and affordability of
mortgage credit. 11 The enterprises generally purchase mortgages from
lenders that conform to established criteria regarding loan size, features,
and underwriting standards (known as conforming loans). The enterprises
hold the loans in their own portfolios or pool them as collateral for
mortgage-backed securities that are sold to investors, for which the
enterprises guarantee the timely payment of principal and interest.
Through Ginnie Mae, a government-owned corporation within the
Department of Housing and Urban Development (HUD), the federal
government also guarantees the timely payment of principal and interest
to investors for mortgage-backed securities backed exclusively by FHA,
RHS, or VA mortgages. 12

In general, mortgage servicers are responsible for sending borrowers
monthly account statements and tax documents, answering customer
service inquiries, collecting monthly mortgage payments, maintaining
escrow accounts for property taxes and hazard insurance, and forwarding

9RHS and VA also directly originate a limited number of loans.

10Borrowers with loans guaranteed by RHS and VA are generally not required to make a
down payment, and borrowers with loans guaranteed by FHA are required to make a
down payment of at least 3.5 percent. For a conventional mortgage, borrowers are
generally required to make a down payment of at least 20 percent or otherwise purchase
private mortgage insurance, which insures the lender against mortgage default. Although
they are not required to pay for additional private mortgage insurance, FHA borrowers pay
an insurance premium, and RHS and VA borrowers pay a guaranty fee.
11The enterprises are currently under the conservatorship of FHFA.

12Ginnie Mae also securitizes mortgages guaranteed by HUD’s Office of Public and Indian
Housing. However, we excluded this program from our report because HUD could not
provide information on associated loans, nor could we identify them in the data we
reviewed.

Page 4 GAO-21-554 COVID-19 Housing Protections
proper payments to the mortgage owners. The servicer can be the same
institution that originated the loan or may change over the life of a
mortgage loan, as mortgage owners and servicers sell servicing rights to
third-party mortgage servicers that service the loan for a fee. See figure 1
for a summary of the role of the federal government and mortgage
servicers in the primary and secondary mortgage markets.

Page 5 GAO-21-554 COVID-19 Housing Protections
Figure 1: Role of the Federal Government and Mortgage Servicers in the Primary and Secondary Mortgage Markets

Depending on the loan type, the duties of servicers can be specified
through guidelines provided by the enterprises for loans in their
mortgage-backed securities, or through requirements provided by the
federal agencies for the loans they guarantee or insure. In addition, the

Page 6 GAO-21-554 COVID-19 Housing Protections
CFPB establishes servicing requirements for most mortgages, regardless
of federal backing. Following the 2007–2009 financial crisis, Congress
passed the Dodd-Frank Wall Street Reform and Consumer Protection
Act, which created the CFPB and granted it rule-making authority under
the Real Estate Settlement Procedures Act. 13 CFPB subsequently issued
a series of final rules amending the implementing regulation (Regulation
X), including new requirements for servicers regarding communication
with delinquent borrowers, evaluation for mortgage relief options, and
procedures for initiating foreclosures, among other requirements. 14

Mortgage Delinquency, A mortgage loan becomes delinquent when a borrower fails to make a
Loss Mitigation, and scheduled periodic payment. 15 In the later stages of delinquency, the loan
may go into default. 16 When the borrower defaults or is at imminent risk of
Foreclosure
default, the servicer must generally evaluate the borrower for certain
mortgage relief options known as loss mitigation prior to initiating
foreclosure.

Loss mitigation options include home retention options and foreclosure
alternatives. Home retention options allow borrowers to stay in their home
and generally include repayment plans, forbearance, and loan
modifications. 17 Foreclosure alternatives generally include short sales or

13Pub. L. No. 111-203, §§ 1002(12)(M), (14), 1011, 124 Stat. 1376. 1964 (2010) (codified
at 12 U.S.C. § 5491).
1412 C.F.R. pt. 1024. CFPB also amended certain mortgage servicing requirements in
Regulation Z, which implements the Truth in Lending Act. See 12 C.F.R. pt. 1026.
15As defined in Regulation X, a borrower and a borrower’s mortgage loan obligation are
delinquent beginning on the date a periodic payment sufficient to cover principal, interest,
and, if applicable, escrow becomes due and unpaid, until such time as no periodic
payment is due and unpaid. 12 C.F.R. § 1024.31.
16No uniform definition exists across the lending industry regarding the amount of
delinquency that results in a default. One definition that can trigger adverse actions
against a borrower is 90 or more days of delinquency. However, according to FHFA,
under the terms of standard single-family mortgage documents, any delinquency is
considered a default.
17Loan modifications are temporary or permanent modifications to the existing loan
agreement that help make payments more affordable, such as by capitalizing the past due
amounts, reducing the interest rate, extending the loan term, reducing the total amount of
the loan through principal forgiveness or forbearance, or a combination of these actions.

Page 7 GAO-21-554 COVID-19 Housing Protections
deeds-in-lieu of foreclosure. 18 The agencies and enterprises have
established loss mitigation hierarchies (or waterfalls) that specify the
order in which servicers should offer their loss mitigation options to
borrowers.

When a mortgage is not otherwise eligible for loss mitigation, the servicer
may initiate foreclosure. Foreclosure is generally a last resort because it
tends to be more costly than loss mitigation and disrupts housing
stability. 19 Foreclosure processes vary from state to state but generally
allow the mortgage owner to obtain the title to the property and sell it to
repay the loan. CFPB servicing rules prohibit servicers (with limited
exceptions) from initiating a foreclosure until a borrower is more than 120
days delinquent or while the borrower’s application for loss mitigation is
being evaluated. 20

Protections for Mortgage Congress, federal agencies, and the enterprises have taken steps to
Borrowers during the protect the housing and financial stability of mortgage borrowers during
the COVID-19 pandemic through expanded mortgage forbearance
Pandemic
options and a foreclosure moratorium. Section 4022 of the CARES Act
required mortgage servicers to provide borrowers with federally backed
mortgages on single-family homes (1–4 units) who have experienced a
financial hardship due to the COVID-19 emergency the option to suspend
or reduce their mortgage payment without charging additional penalties,
fees, or interest. 21 Servicers were required to provide borrowers who
requested forbearance with an initial 6-month forbearance period and the
option to extend it by an additional 6 months. However, the CARES Act
did not define the period during which servicers were required to offer
forbearance to single-family borrowers in accordance with the law.

The agencies and enterprises subsequently clarified deadlines and
provided borrowers with additional time to use CARES Act forbearance.
Borrowers with FHA-, RHS-, and VA-backed loans can request an initial
forbearance through September 30, 2021. The enterprises have not set a

18In a short sale, the lender accepts the proceeds from the sale of a property for less than
the unpaid balance on the loan. In deed-in-lieu of foreclosure, the homeowner transfers all
interest in the property to the lender. In both cases, borrowers may still be required to
make a cash contribution.
19Kristopher Gerardi and Wenli Li, “Mortgage Foreclosure and Prevention Efforts.” Federal
Reserve Bank of Atlanta Economic Review, vol. 95, no.2 (2010): pp.1–13.
20See 12 C.F.R. § 1024.41(f)(1) and 12 C.F.R. § 1024.41(f)(2).

21Pub. L. No. 116-136, div. A, § 4022, 134 Stat. at 490.

Page 8 GAO-21-554 COVID-19 Housing Protections
similar deadline because borrowers with enterprise-backed loans will
continue to have access to 12-month forbearance options that were in
place prior to the CARES Act, according to FHFA officials. In addition,
some borrowers who are currently nearing the end of forbearance can
request an additional extension beyond the 12 months provided in the
CARES Act. Specifically, borrowers with enterprise-backed loans who
were in forbearance as of February 28, 2021, and borrowers with FHA-,
RHS-, or VA-backed loans who requested an initial forbearance on or
before June 30, 2020, may be eligible for an additional 6 months of
forbearance (up to 18 months in total).

Section 4022 of the CARES Act also temporarily prohibited most
foreclosures of federally backed properties. 22 Specifically, the act
prohibited servicers from initiating judicial or non-judicial foreclosure
processes, moving for a foreclosure judgment or order of sale, or
executing a foreclosure-related eviction or foreclosure sale for not less
than 60 days beginning on March 18, 2020. 23 Thereafter, the agencies
and enterprises initiated separate foreclosure moratoriums, which they
have coordinated to extend through July 31, 2021.

Millions of mortgage borrowers took advantage of mortgage forbearance
Mortgage during the pandemic. Since forbearance options were expanded for
Forbearance Has borrowers with federally backed loans through the CARES Act in March
2020, overall forbearance rates peaked in May 2020 at about 7 percent of
Been Widely Used, active mortgage loans (about 3.4 million), according to our analysis of the
Especially among
Higher-Risk
Borrowers

22Pub. L. No. 116-136, div. A, § 4022(c)(2), 134 Stat. at 491. The foreclosure moratorium
excluded foreclosures of vacant and abandoned properties.
23In judicial foreclosure states, lenders file a lawsuit and the court determines a
foreclosure judgment based on hearings and documentation filed by the lender and
homeowner. An order of sale is one judgment that generally orders the sale of the
property at auction to satisfy the remaining debt. In nonjudicial foreclosure states, lenders
initiate foreclosure out of court through a trustee that may provide the borrower directly
with a notice of default and sale.

Page 9 GAO-21-554 COVID-19 Housing Protections
National Mortgage Database. 24 Use of forbearance dropped sharply in
June 2020 among borrowers with federally backed loans, as many
borrowers who entered into forbearance immediately after the option
became available did not extend their forbearance. 25 Use of forbearance
gradually declined through February 2021 to about 5 percent of active
mortgages (about 2.1 million).

Use of forbearance varied across loans backed by the agencies and
enterprises (see fig. 2) and tended to be higher among federally backed
loans targeted towards higher-risk borrowers. Loans insured by FHA—
targeted to first-time, minority, and low- and moderate-income
homebuyers—had the highest rate of forbearance. Forbearance rates
peaked at about 14 percent among FHA loans in May 2020 and declined
to about 11 percent by February 2021. 26 In addition, forbearance rates
were also relatively higher among RHS loans—targeted to low- and
moderate-income, rural borrowers—about 8 percent as of February 2021.
At the same time, the rate of forbearance among conventional loans
backed by the enterprises was about 3 percent.

24Pub. L. No. 116-136, 134 Stat. 281 (2020). The CARES Act required mortgage servicers
to offer up to 12 months of forbearance to borrowers with loans backed by federal
agencies and the enterprises, which they subsequently expanded to 18 months for certain
borrowers. Although not required by the CARES Act, some servicers offered the same or
similar forbearance options to borrowers with non-federally backed loans during the early
stages of the pandemic. Prior to the CARES Act, mortgage forbearance was the primary
option for borrowers with unresolved hardships; however, it was not used as frequently
because delinquency rates were relatively low, according to FHFA. The National Mortgage
Database was developed by FHFA and CFPB and is updated quarterly for a nationally
representative, 5-percent sample of closed-end, first-lien residential mortgages in the
United States. The sample had roughly 2.3 million loans that were active each month from
January 2020–February 2021. Unless otherwise noted, the maximum margin of error
among all values we reported was ± 1 percentage point at the 95 percent confidence
level. See app. I for more information on our methodology.
25Although the CARES Act specified that initial and extended forbearance periods shall be
granted for up to 6 months each, some mortgage servicers offered forbearance periods in
3-month increments, according to Black Knight and the Mortgage Bankers Association.
26According to our analysis of the National Mortgage Database, forbearance rates were
also higher among loans made to first-time homebuyers in general and homes in low- and
moderate-income Census tracts—key groups FHA commonly serves.

Page 10 GAO-21-554 COVID-19 Housing Protections
Figure 2: Percentage of Mortgage Loans in Forbearance by Loan Type, January 2020–February 2021

Note: Loan types include federally backed single-family mortgages insured, guaranteed, purchased,
or secured by the Federal Housing Administration (FHA), Rural Housing Service (RHS), Department
of Veterans Affairs (VA), Fannie Mae and Freddie Mac (enterprises), as well as non-federally backed
conventional mortgages (Other). Percentages have a maximum margin of error of ± 0.4 percentage
points or less at the 95 percent confidence level.

Black and Hispanic borrowers were about twice as likely to take up
forbearance relative to White borrowers for each month since March
2020, according to our analysis of the National Mortgage Database (see
fig. 3). 27 In addition, while Black and Hispanic borrowers accounted for
about 7 and 11 percent, respectively, of all borrowers during each month
in 2020, they comprised about 14 and 20 percent of borrowers in
forbearance as of February 2021. By comparison, White borrowers
represented about 76 percent of borrowers in 2020 but about 60 percent
of those in forbearance. According to several recent studies, Black and
Hispanic borrowers were more likely to have been economically affected
by the pandemic. For example, according to a study by researchers at the
Federal Reserve Bank of Philadelphia, non-White borrowers had
27Race and ethnicity are categorized based on the race and ethnicity of the primary

borrower with whom each loan’s status is associated in Experian records.

Page 11 GAO-21-554 COVID-19 Housing Protections
significantly higher rates of missed mortgage payments, even after
controlling for certain risk factors, such as credit score and loan-to-value
ratio. 28 While forbearance has helped, economic recovery could be more
difficult for borrowers in these groups, which could have longer-term
implications on homeownership and other economic indicators.

Figure 3: Percentage of Mortgage Borrowers in Forbearance by Race and Ethnicity, January 2020–February 2021

Note: Race and ethnicity are categorized based on the race and ethnicity of the primary borrower
with whom each loan’s status is associated in Experian records. Other includes American Indian,
Native Hawaiian or Pacific Islander, and borrowers of two or more non-Black races. Percentages
have a maximum margin of error of ± 0.6 percentage points or less at the 95 percent confidence
level.

Nearly half of the loans that entered forbearance since March 2020
remained in forbearance as of February 2021, according to our analysis
of the National Mortgage Database. Roughly two-thirds of the 5.9 million
loans that entered forbearance between March 2020 and February 2021
(the latest data available at the time of our reporting) entered forbearance
by May 2020. However, only about 55 percent of these loans had exited

28Xudong An et al., Inequality in the Time of COVID-19: Evidence from Mortgage
Delinquency and Forbearance, WP-21-09, Consumer Finance Institute (Philadelphia, PA:
February 2021).

Page 12 GAO-21-554 COVID-19 Housing Protections
forbearance as of February 2021 (see fig. 4). As we discuss later,
borrowers who stayed in forbearance for longer periods have missed
multiple payments that they will need to repay after forbearance.

Figure 4: Number of Mortgage Loans Entering and Exiting Forbearance, March
2020–February 2021

Note: Forbearance entry and exit was estimated by the first and last month during which a loan was
in forbearance, according to the National Mortgage Database. Loans that were still in forbearance as
of February 2021 were shown as not yet having exited forbearance. At the 95 percent confidence
level, loan counts have a margin of error of ± 1 percent, except forbearance exits during April 2020,
which has a margin of error of less than ± 5 percent.

Borrowers who remained in forbearance for longer durations tended to
have lower incomes and increasingly higher-risk financial characteristics.
Specifically, borrowers in forbearance for longer periods tended to have
lower incomes and credit scores, and higher ratios of debt-to-income and

Page 13 GAO-21-554 COVID-19 Housing Protections
loan-to-value. 29 For example, median incomes, credit scores, and
combined loan-to-value ratios were comparable among borrowers who
exited forbearance after 3 months and those who never used
forbearance. However, these median values among borrowers remaining
in forbearance for 5 or more months tended to have notably lower
incomes and credit scores and higher combined loan-to-value- and debt-
to-income ratios. Further, the financial characteristics tended to
deteriorate among borrowers for each additional month in forbearance
(see fig. 5).

29We compared total duration in forbearance among four borrower and loan
characteristics: real income, recent credit score, mark-to-market combined loan-to-value
ratio, and debt-to-income ratio. Borrower income was reported at loan origination and
adjusted to real 2019 dollars. Borrower credit score was the most recent VantageScore
3.0, which was developed by the three main credit-reporting bureaus (Experian,
TransUnion and Equifax). VantageScore 3.0 ranges from 300–850 and accounts for
payment history, percent of credit used, credit balances, age and type of credit, recent
credit inquiries, and available credit amount. We reported the most recent credit score
available as of the fourth quarter of 2020. If a recent credit score was not available from
the fourth quarter of 2019 to the fourth quarter of 2020, we used the credit score at
origination. We estimated mark-to-market combined loan-to-value ratio by summing
outstanding balances across first liens and closed- and open-end second liens (if
applicable) on the property as of the fourth quarter of 2020. We then divided this amount
by the home value reported at origination inflated to estimated December 2020 values
using FHFA’s county-level House Price Index. Debt-to-income ratio was the amount
reported at the time the loan was originated. For more information on our methodology,
see app. I.

Page 14 GAO-21-554 COVID-19 Housing Protections
Figure 5: Mortgage Borrowers Generally Had Lower Incomes and Higher-Risk Financial Characteristics the Longer Their
Loans Were in Forbearance, March 2020–February 2021

Note: Credit score is the primary borrower’s most recent quarterly VantageScore 3.0, which ranges
from 300–850. If a recent credit score was not available from the fourth quarter of 2019 to the fourth
quarter of 2020, we used the credit score at origination. Mark-to-market combined loan-to-value ratio
was estimated by inflating home values at origination to fourth quarter 2020 values using the Federal
Housing Finance Agency House Price Index at the county level and includes the outstanding balance
on first and (if applicable) closed- and open-end second liens from the fourth quarter of 2020.
Borrower income was reported at loan origination and adjusted to real 2019 dollars. Debt-to-income
ratio was reported at origination. Median values have a relative margin of error of ± 2 percent of the
median or less at the 95 percent confidence level.

These factors suggest that the forbearance provision included in the
CARES Act has targeted and helped limit mortgage default risks among
borrowers with greater financial needs. At the same time, these factors
also suggest that many borrowers may need additional loss mitigation or
other assistance to resolve missed payments after forbearance expires.

Page 15 GAO-21-554 COVID-19 Housing Protections
Agencies and
Enterprises Have
Promoted Awareness
of Mortgage
Forbearance among
Delinquent Borrowers
Relatively Few Borrowers Relatively few eligible borrowers who have missed mortgage payments
with Delinquent Loans during the pandemic have not used forbearance. When the use of
forbearance peaked in May 2020, about 267,000 federally backed loans
Have Not Used
(less than 1 percent) were behind two or more payments and were not in
Forbearance forbearance, according to our analysis of the National Mortgage
Database. Further, the number of delinquent loans not in forbearance has
decreased. By February 2021, only about 189,000 federally backed loans
(0.5 percent) were delinquent but not in forbearance.

A somewhat greater share of delinquent borrowers with RHS loans,
compared to other loan types, appears to have missed an opportunity to
use forbearance. Among federally backed loans that were behind two or
more monthly payments as of February 2021, about 2 percent of RHS
loans (about 21,000) were not in forbearance, compared to about 0.3
percent (about 71,000) among the enterprises (see fig. 6).

Page 16 GAO-21-554 COVID-19 Housing Protections
Figure 6: Percentage of Mortgage Loans That Were Behind Two or More Payments and Not in Forbearance, by Loan Type,
January 2020–February 2021

Note: Other includes conventional loans not guaranteed by Fannie Mae and Freddie Mac (the
enterprises). Delinquent loans exclude those in foreclosure or bankruptcy. Percentages have a
maximum margin of error of ± 0.4 percentage points or less at the 95 percent confidence level.

The financial characteristics of delinquent borrowers who have not used
forbearance suggest that they may be at higher risks of mortgage default
and foreclosure. Credit scores are designed to predict the likelihood that a
borrower will repay their loan on time, and the risk of mortgage default
generally increases among borrowers with lower credit scores. 30 As
shown in figure 7, borrowers with loans in forbearance tended to have
higher near prime credit scores (660 at the median) compared to
borrowers with delinquent loans not in forbearance, who tended to have
lower subprime credit scores (540 at the median). Borrowers with current
loans tended to have higher prime credit scores (765 at the median).

30See, for example, GAO, Foreclosure Mitigation: Agencies Could Improve Effectiveness
of Federal Efforts with Additional Data Collection and Analysis, GAO-12-296 (Washington,
D.C.: June 28, 2012).

Page 17 GAO-21-554 COVID-19 Housing Protections
Figure 7: Distribution of Credit Scores among Mortgage Borrowers by Delinquency
and Forbearance Status, as of February 2021

Note: Loan status is as of February 2021, and current loans include those that were not more than 59
days delinquent as of February 2021. Credit score is the primary borrower’s most recent quarterly
VantageScore 3.0, which ranges from 300–850. If a recent credit score was not available from the
fourth quarter of 2019 to the fourth quarter of 2020, we used the credit score at origination.

Delinquent borrowers covered under the CARES Act did not use
forbearance for several reasons. Some borrowers may have been
unaware of the option. For example, Fannie Mae found that about 56
percent of single-family borrowers they surveyed from April through June
2020 were not familiar with forbearance or other mortgage relief options. 31
In addition, some borrowers may have been deterred from using
forbearance because they did not fully understand the terms or
repayment options. In the months after the passage of the CARES Act,
the Offices of Inspector General for FHFA and HUD found that servicers
of enterprise and FHA loans, respectively, inconsistently provided
borrowers with complete information on mortgage forbearance and

31Fannie Mae, National Housing Survey, COVID-19: The Need for Consumer Outreach
and Home Purchase/Financing Digitization (August 2020).

Page 18 GAO-21-554 COVID-19 Housing Protections
repayment options. 32 Specifically, according to their findings, some
servicers’ websites suggested that borrowers were required to provide
documentation of a financial hardship or that they would need to repay
the forbearance in one lump sum—neither of which are required by the
CARES Act. Further, some borrowers may not have used forbearance
because they were afraid to contact their servicer. According to CFPB
officials, servicers have historically had challenges establishing contact
with a certain segment of borrowers, especially after the wave of
foreclosures that followed the 2007–2009 financial crisis. These
borrowers may lack trust in their servicer and be hesitant to proactively
engaging with them. As we will discuss, the agencies and enterprises
have taken steps to address information and awareness concerns.

Agencies and Enterprises The agencies and enterprises have taken steps to address information
Have Directly and awareness concerns regarding forbearance among delinquent
borrowers. CFPB worked with the agencies and enterprises to develop a
Communicated to
housing assistance website that launched in May 2020, which targeted
Delinquent Borrowers to struggling borrowers and summarized information on mortgage
Promote Awareness of forbearance in multiple languages, including how to request forbearance
Mortgage Forbearance and options to repay missed payments. 33 CFPB’s website clarified that
borrowers did not need to provide documentation to their servicer to
request forbearance, and that lump sum repayment was not required after
forbearance. The agencies and enterprises also published similar
information on their respective websites. In addition, the enterprises
issued sample scripts to their mortgage servicers that provided a model
for communicating with borrowers about forbearance.

In addition, the agencies and enterprises conducted direct outreach to
delinquent borrowers who have not used forbearance and may be less
likely to visit government websites or contact their servicer for assistance.
According to agency and enterprise officials:

32Federal Housing Finance Agency, Office of Inspector General, Oversight by Fannie Mae
and Freddie Mac of Compliance with Forbearance Requirements Under the CARES Act
and Implementing Guidance by Mortgage Servicers (July 27, 2020); and Department of
Housing and Urban Development, Office of Inspector General, Some Mortgage Loan
Servicers’ Websites Continue to Offer Information about CARES Act Loan Forbearance
That Could Mislead or Confuse Borrowers, or Provide Little or no Information at all (Sept.
30, 2020).
33Consumer Financial Protection Bureau, Help for homeowners and renters during the
coronavirus national emergency, last modified March 25, 2021,
www.consumerfinance.gov/coronavirus/mortgage-and-housing-assistance/.

Page 19 GAO-21-554 COVID-19 Housing Protections
• The enterprises sent about 21,000 letters in December 2020 to
borrowers who had missed two or more payments and were not in
forbearance to notify them of available mortgage relief options.
• HUD’s Office of Housing Counseling and FHA disseminated a media
kit and hosted a series of webinars for about 1,600 housing
counseling agencies from November 2020 through March 2021 that
focused on establishing contact with struggling borrowers and
encouraging them to contact their servicer.
• RHS’s Customer Service Center, which services loans provided
directly by the agency, used an automated dialing system to call
borrowers at various stages of delinquency to inform them of
forbearance and other mortgage relief options.
• VA loan technicians directly contacted borrowers when they became
delinquent for 120 days to discuss forbearance and other loss
mitigation options.
• CFPB worked with industry and advocacy groups to develop
marketing materials for an outreach campaign designed to help
servicers communicate over various types of media to struggling
borrowers who had not opted into forbearance. 34
Data suggest that these efforts have helped and that forbearance has
effectively targeted borrowers who struggled to make payments during
the pandemic. For example, according to Fannie Mae, its outreach effort
resulted in about 11 percent of the delinquent borrowers initiating
forbearance and another 16 percent resolving their delinquency by
repaying missed payments (as of February 2021). In addition, far fewer
borrowers who became delinquent during the pandemic have not used
forbearance compared to those who were delinquent prior to the
pandemic. According to Black Knight, about 27 percent of borrowers who
missed three or more monthly payments or were in foreclosure before the
pandemic (or about 194,000 borrowers) were not in forbearance or
another loss mitigation option as of February 2021. 35 By comparison,
among borrowers who missed three or more monthly payments or
entered foreclosure after the pandemic started, only about 2 percent (or
about 35,000 borrowers) were not in forbearance or another loss
mitigation option.

34See www.covidhelpforhome.org.

35Black Knight, Mortgage Monitor: February 2021 Report.

Page 20 GAO-21-554 COVID-19 Housing Protections
CFPB Modified Early CFPB also modified early intervention requirements for servicers to
Intervention Requirements increase awareness of forbearance among delinquent borrowers. CFPB’s
regulations implementing the Real Estate Settlement Procedures Act
for Servicers to Further
(Regulation X) require that servicers contact delinquent borrowers at
Promote Awareness of periodic intervals and inform them of available loss mitigation options. For
Mortgage Forbearance example, servicers must attempt to establish live contact with a borrower
among Delinquent and inform them of their loss mitigation options no later than the 36th day
Borrowers of delinquency, and again no later than 36 days after each payment is
due while the borrower remains delinquent. 36 A similar requirement exists
for written notifications. 37

In June 2021, CFPB finalized amendments to Regulation X that
temporarily require servicers to discuss COVID-19 mortgage forbearance
and related information with borrowers during live contact. 38 For
borrowers with a COVID-19 hardship who are not in forbearance,
servicers are generally required to inform them of available forbearance
programs and the actions they must take to be evaluated. For borrowers
who are already in forbearance, servicers are required to inform them of
their forbearance expiration date; options for forbearance extensions,
repayment, and other loss mitigation; and actions they must take to be
evaluated for such options prior to the end of the forbearance. In both
cases, servicers are also required to provide borrowers at least one way
they can find contact information for homeownership counseling services.

36See 12 CFR § 1024.39(a).

37See 12 CFR § 1024.39(b).

38Consumer Financial Protection Bureau, Protections for Borrowers Affected by the
COVID-19 Emergency Under the Real Estate Settlement Procedures Act (RESPA),
Regulation X, June 25, 2021. These requirements expire on October 1, 2022.

Page 21 GAO-21-554 COVID-19 Housing Protections
Foreclosures Have
Declined during
Moratoriums, and
Agencies and
Enterprises Have
Taken Steps to
Further Limit Default
and Foreclosure
Risks
Federal Moratoriums Have New foreclosures have declined and remained low during the pandemic
Limited Foreclosures because of federal foreclosure moratoriums. 39 New foreclosure starts
during the Pandemic, but among all single-family loans in June 2020 declined by about 85 percent
from the prior June (from about 40,000 to about 6,000), and remained
Risks Remain as about 85 percent lower year-over-year for each month through February
Delinquency Grows 2021, on average, according to our analysis of data published by Black
among Borrowers in Knight (see fig. 8).
Forbearance

39The CARES Act prohibited servicers of federally backed mortgage loans from initiating
any judicial or nonjudicial foreclosure process, moving for a foreclosure judgment or order
of sale, or executing a foreclosure-related eviction or foreclosure sale for not less than the
60-day period beginning on March 18, 2020. Pub. L. No. 116-136, div. A, § 4022(c)(2),
134 Stat. at 491.Thereafter, the agencies and enterprises initiated separate foreclosure
moratoriums, which they have coordinated to extend through July 31, 2021.

Page 22 GAO-21-554 COVID-19 Housing Protections
Figure 8: Number of Mortgage Loans Entering Foreclosure, by Month (June 2019–February 2021)

Note: Foreclosure data were only available through February 2021 at the time of our review.
Foreclosure starts include any active loan that was not in foreclosure in the prior month that moved
into foreclosure in the current month. The figure includes vacant and abandoned properties and
private loans that were not federally backed—neither of which were covered by the CARES Act
foreclosure moratorium.

Some foreclosure activity has continued during the moratoriums, which
only cover federally backed loans—about 80 percent of all single-family
loans, according to data from the National Mortgage Database. In
addition, the moratoriums exclude those properties with federally backed
loans that are vacant or abandoned. Because of these exclusions, about
16,200 new foreclosures were initiated in the fourth quarter of 2020,
according to Black Knight. Federally backed mortgages comprised nearly
half of these new foreclosures, which was similar to pre-pandemic trends.
For example, according to our analysis of FHA, FHFA, and Black Knight
data, loans backed by the enterprises and FHA comprised about 46
percent of new foreclosure starts in the fourth quarter of 2020 (or about
7,500 loans), as compared to about 49 percent of new foreclosure starts
in the fourth quarter of 2019 (or about 57,500 loans).

Foreclosure activity will likely increase when the moratoriums end and
forbearance provisions expire. Servicers have delayed processing a
backlog of foreclosures that would have occurred regardless of the
pandemic. Specifically, about 15 percent of foreclosures that would have

Page 23 GAO-21-554 COVID-19 Housing Protections
been expected based on recent historical trends have been processed
each month since the start of the moratoriums, on average, according to
our analysis of Black Knight data.

The risk of an increase in foreclosures also exists due to the increasing
rate of delinquency and missed payments among borrowers in
forbearance. When the use of forbearance peaked in May 2020 at about
4.8 million borrowers, about 900,000 had missed two or more payments,
according to Black Knight—equivalent to about 19 percent of those in
forbearance. 40 Although use of forbearance has since declined, a greater
share of borrowers have missed payments. By February 2021, about 2.4
million borrowers had missed two or more payments—equivalent to about
90 percent of the 2.7 million in forbearance (see fig. 9). According to our
analysis of the National Mortgage Database, borrowers with loans in
forbearance as of February 2021 had missed—and will eventually need to
repay—an average of eight monthly mortgage payments, totaling $8,300
on average.

40Black Knight reported forbearance on a weekly basis and delinquency as of the end of
each month. Delinquency counts reflect borrowers’ status as of their due dates. Counts of
borrowers who had missed two or more payments as of May, for example, reflect
borrowers who missed payments in March and April.

Page 24 GAO-21-554 COVID-19 Housing Protections
Figure 9: Number of Mortgage Loans in Forbearance and Length of Delinquency, April 2020–February 2021

Note: Delinquent borrowers include those in forbearance and not in forbearance. Black Knight
reported forbearance on a weekly basis and delinquency as of the end of each month. Delinquency
counts reflect borrowers’ status as of their due dates. Counts of borrowers who had missed two or
more monthly payments as of May, for example, reflect borrowers who missed payments in March
and April.

Many of these borrowers may be at risk of default and foreclosure when
the moratoriums end if they do not contact their servicer at the end of
their forbearance. Borrowers are still considered delinquent under
Regulation X if they do not make a payment during forbearance except
when their forbearance agreement modifies the underlying mortgage
agreement. 41 According to CFPB officials, many do not. In addition,
mortgage servicing rules generally allow servicers to begin processing
foreclosures after 120 days of delinquency (or four months of missed
payments). 42 As a result, borrowers who cannot afford to immediately

41For the purposes of Regulation X, a preexisting delinquency period could continue or a
new delinquency period could begin even during a forbearance program that pauses or
defers loan payments if a periodic payment sufficient to cover principal, interest, and, if
applicable, escrow is due and unpaid according to the loan contract during the
forbearance program.
42See 12 C.F.R. § 1024.41(f)(1)(i). With limited exceptions, mortgage servicers can make
the first notice or filing required by applicable law for any judicial or nonjudicial foreclosure
process when a loan is more than 120 days delinquent.

Page 25 GAO-21-554 COVID-19 Housing Protections
repay their missed payments after forbearance—likely to be many given
the extent of delinquency and missed payments—must contact their
servicer to discuss loss mitigation options to avoid default and
foreclosure.

Agencies and Enterprises
Have Taken Steps to Limit
Default and Foreclosure
Risks
Extended Forbearance Options The agencies and enterprises have extended options for borrowers to
enter and stay in forbearance. Specifically, the agencies and enterprises
extended their deadlines to allow borrowers who requested forbearance
as of June 30, 2020 (for agency loans) or were in an active forbearance
plan as of February 28, 2021 (for enterprise loans) to extend forbearance
by an additional 6 months (18 months in total). In addition, borrowers with
agency loans who have not used forbearance can opt into an initial
forbearance through September 30, 2021. The enterprises have not
provided a deadline because borrowers with enterprise-backed loans will
continue to have access to 12-month forbearance options that were in
place prior to the CARES Act, according to FHFA officials. Because of
these extensions, borrowers with long-term delinquencies who are at a
heightened risk of default—those who entered forbearance early in the
pandemic and those who never entered forbearance—have the option to
continue forbearance after the foreclosure moratoriums end.

Enhanced Options to Reinstate The agencies and enterprises have also introduced new options, or
Loans after Forbearance expanded existing options, to help borrowers reinstate their loans after
forbearance to avoid default. Borrowers who cannot reinstate their loan
after forbearance through one lump-sum repayment must work with their
servicer to arrange a repayment or other loss mitigation options. 43
Although these options differ across the agencies and enterprises, they
generally include the following:

• Repayment plans. Borrowers who are able to resume their regular
payments and repay missed payments in the near term can do so
through a repayment plan. A repayment plan is an agreement
between a borrower and their servicer to repay the missed amount
over time in addition to regular monthly payments. While under a

43Borrowers are not required to repay missed payments in a lump sum after forbearance.

Page 26 GAO-21-554 COVID-19 Housing Protections
repayment plan, the borrower’s monthly payment will increase for a
certain period until the forbearance is repaid.
• Payment deferral. Borrowers who can afford to resume their regular
payment but cannot afford to repay missed payments in the near term
may be eligible to defer repayment. A payment deferral allows the
borrower to resume their regular monthly payment but defer
repayment of the missed payments until a later date. 44 Under
payment deferral options provided by the enterprises, FHA, and RHS,
missed payments are placed at the end of the mortgage through a
noninterest-bearing secondary lien or balloon payment, which
becomes due when the borrower sells or transfers ownership of their
property, or when they refinance or pay off the loan.
The enterprises, FHA, and RHS have expanded their payment
deferral options to allow borrowers affected by the pandemic the
option to defer repayment of all missed payments while in
forbearance. In addition, VA finalized a new payment deferral program
in May 2021 that will be available to VA borrowers in July 2021. 45 VA
did not previously offer its borrowers a payment deferral option, and
its new program—known as the COVID-19 Veterans Assistance
Partial Claim Payment Program—is similar to options provided by
FHA, RHS, and the enterprises.
• Loan modification. Borrowers who can no longer afford their regular
payment or repay missed payments in the near term may be eligible
to modify their loan. Loan modifications help make monthly payments
more affordable by adjusting certain aspects of the existing mortgage,
such as lowering the interest rate or extending the loan term. For
example, a borrower exiting forbearance who has experienced a
longer lasting change in income may be able to lower their monthly
payments by having their servicer capitalize the missed payments into
the outstanding balance and extend the loan term (effectively
increasing the number of remaining payments).
The agencies and enterprises have taken steps to expand and
streamline loan modifications during the pandemic. In June 2021, the
enterprises expanded eligibility for interest rate reductions through
their Flex Modification programs to borrowers with permanent COVID-
44We refer to these loss mitigation options as payment deferrals, which is the enterprises’
option. FHA’s comparable option is known as a partial claim, and RHS’s comparable
option is known as a mortgage recovery advance.
45Department of Veterans Affairs, Loan Guaranty: COVID-19 Veterans Assistance Partial
Claim Payment Program, 86 Fed. Reg. 28692 (May 28, 2021).

Page 27 GAO-21-554 COVID-19 Housing Protections
19 hardships regardless of their loan-to-value ratio. 46 FHA also
introduced new loan modification options for borrowers affected by
COVID-19 that do not require a trial period and have flexible or
reduced documentation requirements. For example, FHA introduced
its COVID-19 Advance Loan Modification in June 2021, which
modifies the mortgage term and rate to reduce monthly principal and
interest payments by at least 25 percent for borrowers who have
missed three or more monthly payments or are exiting forbearance.
FHA also revised its loss mitigation hierarchy to allow servicers to
offer loan modifications more quickly to struggling borrowers. In
addition, VA and RHS have allowed servicers to use streamlined loan
modification options during the pandemic that have limited
documentation requirements and are otherwise reserved for natural
disasters.
The American Rescue Plan Act of 2021 also provided RHS with $39
million in additional funding to refinance its direct loans, which the
agency will focus on borrowers who previously received
forbearance. 47 RHS officials told us they anticipate that many direct
borrowers will experience pre-foreclosure processing and need to
refinance their existing loan debt to avoid foreclosure when the
moratorium ends. 48
Status of Forbearance Exits Borrowers who exited forbearance with missed payments most commonly
and Unresolved Delinquencies resolved their delinquency through expanded payment deferral options.
According to the Mortgage Bankers Association, about 26 percent of
borrowers who used mortgage forbearance during the pandemic and
exited as of February 2021 resolved their missed payments through a
payment deferral option. About another 15 percent reinstated their loan
through a lump sum repayment, and about 8 percent initiated or
completed a loan modification. In addition, about 28 percent of borrowers
who exited forbearance as of February 2021 did not have missed
payments to repay because they continued to make regular payments
while in forbearance (see fig. 10). This trend suggests that many

46Previously, the enterprises required borrowers to have a loan-to-value ratio or 80
percent or more to be eligible for an interest-rate reduction. Loan modifications through
the Flex Modification programs do not require documentation for borrowers who have
missed three or more monthly payments.
47Pub. L. No. 117-2, tit.III, § 3207, 135 Stat. 4, 67 (2021).

48RHS’ Section 502 Direct Loan Program provides mortgage payment assistance directly
to rural borrowers with low and very low incomes who are not otherwise able to obtain a
loan. Section 502 borrowers generally are not required to make a down payment and
carry a greater credit risk.

Page 28 GAO-21-554 COVID-19 Housing Protections
borrowers used forbearance in the early months of the pandemic to
hedge against financial uncertainty.

Figure 10: Percentage of Mortgage Borrowers Who Have Exited Forbearance by
Disposition Status, June 2020–February 2021

Note: Other includes repayment plans, short sales, and deed-in-lieu of foreclosure transfers, among
others.

Borrowers have resolved their delinquencies in different ways after
forbearance depending on the repayment and loss mitigation options
made available to them. For example, FHA requires servicers to evaluate
all eligible borrowers exiting forbearance for a payment deferral first
before other loss mitigation options while RHS does not. As a result, by
February 2021, about 21 percent of FHA borrowers who exited
forbearance had resolved their missed payments through a payment
deferral, as compared to less than 1 percent of RHS borrowers, based on
data provided by both agencies. Instead, according to their data, a
greater share of RHS borrowers resolved their missed payments through
loan modifications (about 37 percent of those who had exited
forbearance) compared to less than 3 percent among FHA borrowers.

Page 29 GAO-21-554 COVID-19 Housing Protections
At the same time, some borrowers who have exited forbearance have not
yet resolved their delinquency. 49 About 14 percent of borrowers who
exited forbearance as of February 2021 remained delinquent without
entering into a loss mitigation option, according to the Mortgage Bankers
Associations. Further, post-forbearance delinquency was higher among
certain loan types, based on data provided by the agencies and
enterprises. For example, about 20 percent of RHS borrowers who had
exited forbearance by February 2021 had not resolved their delinquency
through repayment or loss mitigation. By comparison, about 5 percent of
Fannie Mae borrowers and 7 percent of Freddie Mac borrowers had
exited forbearance and not resolved their delinquency through repayment
or loss mitigation (by February 2021 and December 2020, respectively).
Some of these borrowers may be at risk of default and foreclosure when
the foreclosure moratoriums end. As we discussed previously, borrowers
can still be considered delinquent under Regulation X while in
forbearance, and mortgage servicing rules generally allow servicers to
begin processing foreclosures after 120 days of delinquency (or 4 months
of missed payments).

CFPB Efforts to Streamline CFPB has taken several steps in recent months to streamline loss
Loss Mitigation Processing and mitigation processing and modify foreclosure review requirements to
Limit Foreclosures assist borrowers exiting forbearance in the second half of 2021. In June
2021, CFPB finalized amendments to Regulation X that allow servicers to
offer streamlined loan modifications to delinquent borrowers affected by
COVID-19 without completing certain application review and borrower
notification requirements. 50 CFPB previously amended Regulation X
earlier in the pandemic to allow servicers to streamline application review
requirements for payment deferrals. 51 In addition, the June 2021
amendments establish temporary procedural safeguards until January 1,

49Some borrowers who are delinquent after forbearance may also be in the process of
working with their servicer to determine a suitable loss mitigation option. For example,
FHA allows its servicers 120 days to complete a loss mitigation action after forbearance
ends.
50Consumer Financial Protection Bureau, Protections for Borrowers Affected by the
COVID-19 Emergency Under the Real Estate Settlement Procedures Act (RESPA),
Regulation X, June 25, 2021. Eligible loan modifications must meet certain criteria, and
servicers must comply with several safeguards designed to protect borrowers against any
harm that could eventually result from accepting loan modifications based on the
evaluation of an incomplete application.
51Consumer Financial Protection Bureau, Treatment of Certain COVID-19 Related Loss
Mitigation Options Under the Real Estate Settlement Procedures Act (RESPA) Regulation
X, 85 Fed. Reg. 39055 (June 30, 2020).

Page 30 GAO-21-554 COVID-19 Housing Protections
2022 that are intended to limit avoidable foreclosures and which must be
met before a servicer can initiate a foreclosure for a mortgage that
became delinquent during the pandemic. 52

CFPB has also prioritized its oversight of loss mitigation to encourage
servicers to limit avoidable foreclosures as forbearance options and
foreclosure moratoriums begin to expire. In late March 2021, CFPB
published a compliance bulletin targeted to mortgage servicers in
anticipation of a rapid increase in borrowers needing loss mitigation
assistance after forbearance. 53 In the bulletin, the agency urged servicers
to dedicate sufficient resources and staff to ensure they can communicate
clearly with borrowers, effectively manage borrower requests for
assistance, promote loss mitigation, and ultimately reduce avoidable
foreclosures and foreclosure-related costs. CFPB plans to consider these
factors in evaluating the effectiveness of servicers’ efforts to manage loss
mitigation and whether to take enforcement of supervisory actions to
address regulatory violations

Home Price Appreciation Appreciation in home prices and new homeowner assistance funds may
and New Federal also help limit default and foreclosure risks after pandemic housing
protections expire. Appreciation in property values helps borrowers more
Assistance for
quickly build equity in their homes (or the difference between any
Homeowners May Further outstanding loans on the property and its current market value). For
Mitigate Default and borrowers who continue to experience challenges after forbearance,
Foreclosure Risks having home equity will provide many with the option to refinance their
home with a new mortgage that lowers their monthly payment.
Alternatively, home equity can help borrowers with a more permanent
hardship, such as loss of income due to the death of a spouse, sell their
property to repay their mortgage and potentially collect sales proceeds.
By comparison, borrowers with no or negative equity in their property—
meaning they owe more than the value of their property—are generally at
a heightened risk of default and foreclosure.

Home prices have appreciated steadily since the collapse of the U.S.
housing market during the 2007–2009 financial crisis. Between the first

52Specifically, servicers may proceed with a foreclosure if (1) the borrower submitted a
completed loss mitigation application and the servicer is permitted to make the first notice
or filing under 12 C.F.R § 1024.41(f)(2); (2) the property securing the mortgage loan is
abandoned under state or municipal law; or (3) the servicer has conducted specified
outreach and the borrower is unresponsive.
53Consumer Financial Protection Bureau, Bulletin 2021-02: Supervision and Enforcement
Priorities Regarding Housing Insecurity (Mar. 31, 2021).

Page 31 GAO-21-554 COVID-19 Housing Protections
quarter of 2011 and the first quarter of 2021, U.S. home prices
appreciated by about 78 percent nationally, according to FHFA’s
seasonally adjusted House Price Index. Sparked in part by historically low
interest rates, increased homebuyer demand, and a low inventory of
homes for sale, home prices have grown faster on a year-to-year basis
during the pandemic than at any point during the past 30 years—about 12
percent from February 2020 to February 2021.

Because of this rapid appreciation, few borrowers do not have equity in
their homes. 54 Specifically, about 1.9 percent of borrowers (about 44,000)
who were at a higher risk of default and foreclosure—those still in
forbearance or delinquent but not in forbearance—had no or negative
equity as of February 2021, according to our analysis of the National
Mortgage Database. 55 On average, borrowers who were in forbearance or
delinquent but not in forbearance had about 64 percent equity available in
their properties. A somewhat greater share of borrowers with RHS and
VA loans had no or negative equity compared to borrowers with FHA and
enterprise loans, likely due in part to differences in down payment
requirements. 56 However, these rates were still low compared to past
foreclosures crises. For example, at the peak of foreclosures in 2011 after
the 2007–2009 financial crisis, about 17 percent of all borrowers—and 44

54The Urban Institute similarly found that relatively few borrowers had negative home
equity in early 2021. See Michael Neal and Laurie Goodman, The Predicted Foreclosure
Surge Likely Won’t Happen, Even among Financially Vulnerable Borrowers (Urban
Institute, Feb. 11, 2021).
55Borrower home equity was estimated by comparing the home value recorded at
origination with its appreciated value using the FHFA’s December 2020 county-level
House Price Index. This estimate includes closed- and open-end first and second liens, if
applicable. Delinquent borrowers include those who were 60–180 days delinquent but not
in bankruptcy or foreclosure. Estimates of 2011 homeowner equity do not include second
liens. See app. I for additional information on our methodology. We did not review the
amount of equity borrowers would need to break even on a sale after accounting for
closing costs. According to Black Knight, borrowers in forbearance may need at least 10
percent in home equity to sell their homes and avoid foreclosure by paying off the
remaining mortgage and covering closing costs.
56Borrowers with loans guaranteed by RHS and VA are generally not required to make a
down payment, and borrowers with loans insured by FHA are required to make a down
payment of at least 3.5 percent. By comparison, conventional loans, which the enterprises
typically purchase, require borrowers to make a down payment of at least 20 percent of
the purchase price to avoid private mortgage insurance requirements. However, the
enterprises can purchase loans with a loan-to-value ratio of up to 97 percent—
comparable to a down payment of about 3 percent for a recently originated loan.

Page 32 GAO-21-554 COVID-19 Housing Protections
percent of borrowers with delinquent loans—had negative home equity
(see fig. 11). 57

Figure 11: Percentage of Mortgage Borrowers without Home Equity as of 2020 and 2011, by Loan Type and Loan Status

Note: Other includes conventional loans not guaranteed by Fannie Mae and Freddie Mac (the
enterprises). Borrower home equity was estimated by comparing the home value recorded at
origination with its appreciated value using the Federal Housing Finance Agency’s December 2020
county-level House Price Index. 2020 estimates include closed- and open-end first and second liens,
if applicable. Loan status is as of February 2021. Forbearance status was not available for 2011.
Some delinquent loans in 2011 may have been in forbearance, and some loans in forbearance in
2021 may not be delinquent because borrowers continued to make payments. Percentages have a
maximum margin of error of ± 0.4 percentage points at the 95 percent confidence level.

In addition, new financial assistance is available that will further limit
default and foreclosure risks among homeowners who continue to
struggle. The American Rescue Plan Act established the Homeowner
Assistance Fund, which provides nearly $10 billion to assist borrowers
who experienced a financial hardship during the pandemic (after January

57Forbearance status was not available for 2011. Some delinquent loans in 2011 may
have been in forbearance, and some loans in forbearance in 2021 may not be delinquent
because borrowers continued to make payments.

Page 33 GAO-21-554 COVID-19 Housing Protections
21, 2020). 58 The funds are available to eligible state, territorial, and tribal
governments and are intended to help prevent mortgage delinquencies,
defaults, and foreclosures, among other outcomes. According to the
Department of the Treasury’s guidance, eligible entities that receive funds
can use them to help borrowers make mortgage payments, reinstate their
mortgage after forbearance, or facilitate a mortgage interest rate
reduction, among other eligible expenses. We will monitor Treasury’s
efforts to administer and oversee these funds in future reports.

We provided a draft of this report to CFPB, Department of Agriculture,
Agency Comments HUD, VA, FHFA, and the enterprises for review and comment. We
received and incorporated technical comments from CFPB, FHFA, the
enterprises, and VA, as appropriate. Department of Agriculture and HUD
told us they did not have comments on the draft.

We are sending copies of this report to the appropriate congressional
committees, the Acting Director of CFPB, Secretary of Agriculture,
Secretary of HUD, Secretary of VA, Acting Director of FHFA, and other
interested parties. In addition, the report is available at no charge on the
GAO website at https://www.gao.gov.

If you or your staff have any questions about this report, please contact
me at (202) 512-8678 or pendletonj@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. GAO staff who made key contributions to this
report are listed in appendix II.

John H. Pendleton
Director, Financial Markets and Community Investment

58Pub. L. No. 117-2, tit. III, § 3206, 135 Stat. 4, 63 (2021).

Page 34 GAO-21-554 COVID-19 Housing Protections
List of Committees

The Honorable Patrick Leahy
Chairman
The Honorable Richard Shelby
Vice Chairman
Committee on Appropriations
United States Senate

The Honorable Ron Wyden
Chairman
The Honorable Mike Crapo
Ranking Member
Committee on Finance
United States Senate

The Honorable Patty Murray
Chair
The Honorable Richard Burr
Ranking Member
Committee on Health, Education, Labor, and Pensions
United States Senate

The Honorable Gary C. Peters
Chairman
The Honorable Rob Portman
Ranking Member
Committee on Homeland Security and Governmental Affairs
United States Senate

The Honorable Rosa L. DeLauro
Chairwoman
The Honorable Kay Granger
Ranking Member
Committee on Appropriations
House of Representatives

The Honorable Frank Pallone, Jr.
Chairman
The Honorable Cathy McMorris Rodgers
Republican Leader
Committee on Energy and Commerce
House of Representatives

Page 35 GAO-21-554 COVID-19 Housing Protections
The Honorable Bennie G. Thompson
Chairman
The Honorable John Katko
Ranking Member
Committee on Homeland Security
House of Representatives

The Honorable Carolyn B. Maloney
Chairwoman
The Honorable James Comer
Ranking Member
Committee on Oversight and Reform
House of Representatives

The Honorable Richard Neal
Chairman
The Honorable Kevin Brady
Republican Leader
Committee on Ways and Means
House of Representatives

Page 36 GAO-21-554 COVID-19 Housing Protections
Appendix I: Objectives, Scope, and
Appendix I: Objectives, Scope, and
Methodology

Methodology

This report examines (1) the extent to which mortgage forbearance may
have contributed to housing stability during the pandemic, (2) what efforts
federal agencies and the enterprises have taken to promote awareness of
mortgage forbearance among delinquent borrowers, and (3) what efforts
federal agencies and the enterprises have taken to limit mortgage default
and foreclosure risks after federal mortgage forbearance and foreclosure
protections expire. The federal entities in our review are the Consumer
Financial Protection Bureau (CFPB), Department of Agriculture’s Rural
Housing Service (RHS), Department of Housing and Urban
Development’s Federal Housing Administration (FHA), Department of
Veterans Affairs (VA), Federal Housing Finance Agency (FHFA), and the
government-sponsored enterprises Fannie Mae and Freddie Mac
(enterprises).

To examine how mortgage forbearance has contributed to housing
stability during the pandemic, we reviewed and analyzed data on
mortgage forbearance and delinquency, borrower characteristics, and
homeowner equity using data from National Mortgage Database. 1 We
used data from January 2020–February 2021 to cover the onset of the
COVID-19 pandemic through the most recent data available at the time of
our reporting. 2 We analyzed the following:

1The National Mortgage Database program is jointly funded and managed by FHFA and
CFPB. It is a de-identified, loan-level database of closed-end first-lien residential
mortgages that is (1) representative of the market as a whole; (2) contains detailed, loan-
level information on the terms and performance of mortgages, as well as characteristics of
the associated borrowers and properties; (3) is continually updated; and (4) has a
historical component dating back before the 2007–2009 financial crisis. According to
FHFA officials who manage the database, the core data represent a statistically valid
random sample of 1-in-20 closed-end, first-lien mortgages in the credit files of Experian,
one of the three national credit bureaus. We assessed the reliability of these data by
interviewing agency officials, testing for errors, and reviewing technical documentation,
and we found them reliable for reporting mortgage performance trends and borrower
characteristics. The sample had roughly 2.3 million loans that were active each month
from January 2020–February 2021. We calculated margins of error at the 95 percent
confidence level for all values we report. Unless otherwise noted, all values have a
maximum margin of error of ± 1 percentage point. Due to the large sample size and low
margins of error, we did not conduct additional statistical significance testing when making
comparisons across different populations.
2Most data on loan performance were available on a monthly basis. In a few cases, we
used quarterly data when monthly data were not available, such as for house prices and
borrower credit scores. Data are both at the loan- and borrower-level, however, this
analysis uses loan-level data and the borrower characteristics reported here reflect the
primary borrower of each loan.

Page 37 GAO-21-554 COVID-19 Housing Protections
Appendix I: Objectives, Scope, and
Methodology

• Mortgage forbearance and delinquency. We analyzed forbearance
and delinquency rates across loan types—enterprise, FHA, RHS, VA,
and private loans—and borrower characteristics. We determined
forbearance and delinquency rates by applying the “stale account
rule” to the database’s indicator variables for forbearance and loan
performance. 3 We reported delinquency as any loan that was behind
two or more monthly payments (60 or more days delinquent) and not
in forbearance to capture loans in deeper stages of delinquency and
exclude loans with one missed payment but which became current the
following month. 4
We estimated a loan’s entry into forbearance based on the first month
during which it was shown as being in forbearance since March 2020
(after applying the stale account rule). We estimated exit from
forbearance based on the last month in which the loan was reported
as being in forbearance, according to National Mortgage Database
definitions. We did not consider loans in forbearance as of February
2021—the most recent period available at the time of our reporting—
to have exited forbearance. To estimate missed payments of
borrowers with loans in forbearance, we calculated the average
cumulative difference between all scheduled payments and all actual
payments made on these loans in forbearance.

• Borrower characteristics. We analyzed loan status and performance
across borrower characteristics. We based selected borrower
characteristics—race, ethnicity, first-time homebuyer status, and
credit score—as well as loan status and performance information on
the primary borrower associated with each loan and with whom the
Experian records are associated. We categorized borrower race and
ethnicity based on codes in the database. We considered any
Hispanic borrower regardless of race as its own race category. We
considered Black borrowers to additionally include borrowers of two

3Unless otherwise noted, we reported loans in forbearance as any loan in forbearance
regardless of performance status, including loans in forbearance that may still have been
current on payments. Forbearance status is based on mortgage servicer records reported
to Experian that indicate whether a loan’s performance or status for a given month
included a deferred payment, was affected by natural or declared disaster, was reported
as being in forbearance, or had a required payment of $0 (with some restrictions).
However, not all loans were reported to Experian each month, such as in the event of a
disputed credit report or if the servicer only reports quarterly. In such cases, the stale
account rule applies a month-by-month lookback period for up to 3 months until a status is
available.
4We also excluded loans in foreclosure or bankruptcy from delinquency rates.

Page 38 GAO-21-554 COVID-19 Housing Protections
Appendix I: Objectives, Scope, and
Methodology

races of which at least one was Black. We also separately created a
race category “other,” which includes American Indian, Native
Hawaiian or Pacific Islander, and two or more non-Black races. These
race categories represented a relatively small share of borrowers in
the database.
In addition, we adjusted borrower income for inflation, which was
recorded at loan origination, to real 2019 dollars using the Consumer
Price Index for All Urban Consumers as reported in the National
Mortgage Database. 5 For recent borrower credit scores, we used the
most recently reported credit score from fourth quarter 2019–fourth
quarter 2020 provided in the database for each primary borrower. 6 If
an updated credit score was unavailable, we used the borrower’s
credit score reported at loan origination. We also determined whether
homes were located in low- and moderate-income census tracts using
definitions and 2019 data included in the National Mortgage Database
that are based on data maintained by the Federal Financial
Institutions Examination Council for purposes of the Community
Reinvestment Act. 7

• Homeowner equity. We analyzed homeowner equity across loan
status, including loans in forbearance and delinquency. To estimate
mark-to-market home value (fair current values) as of the fourth
quarter of 2020, we adjusted home values recorded at loan origination
to December 2020 values using FHFA’s House Price Index at the
county level. 8 We estimated homeowner equity and mark-to-market

5The Consumer Price Index is produced by the Bureau of Labor Statistics and measures
changes in prices of all goods and services purchased for consumption by urban
households.
6National Mortgage Database uses VantageScore 3.0, which was developed by the three
main credit-reporting bureaus (Experian, TransUnion and Equifax). The VantageScore 3.0
ranges from 300–850 and accounts for payment history, percent of credit used, credit
balances, age and type of credit, recent credit inquiries, and available credit amount.
7Community Reinvestment Act regulations use data on family income in a census tract
relative to family income in the surrounding metropolitan or nonmetropolitan area where
the tract is located to determine whether a tract is low- or moderate-income. A census
tract is low-income if median family income in the tract is less than 50 percent of the
median family income in the surrounding metropolitan or rural area, and it is moderate-
income if median family income in the tract is at least 50 percent but less than 80 percent
of median family income in the surrounding metropolitan or rural area. See, e.g., 12 C.F.R.
§ 345.12.
8FHFA’s House Price Index is a broad measure of the movement of single-family house
prices. It is a weighted, repeat-sales index, meaning that it measures average price
changes in repeat sales or refinancing on the same properties.

Page 39 GAO-21-554 COVID-19 Housing Protections
Appendix I: Objectives, Scope, and
Methodology

loan-to-value ratio—or combined loan-to-value ratio, if applicable—by
summing the outstanding loan balance of each closed-end first-lien
mortgage and any applicable closed- or open-end second liens
associated with each first-lien mortgage as of the fourth quarter of
2020. We then divided the sum of outstanding balances by adjusted
home values to estimate the updated homeowner loan-to-value (or
combined loan-to-value) ratios—the inverse of which indicates the
amount of homeowner equity. We only considered open mortgages
that were current, in forbearance, or 30–180 days delinquent as of
February 2021 (subject to the stale account rule) and excluded loans
in foreclosure or bankruptcy.
Similarly, we estimated fourth quarter 2011 mark-to-market
homeowner equity by adjusting home values at origination to fourth
quarter 2011 values using the FHFA’s House Price Index. However,
because of data limitations, homeowner equity for 2011 does not
include second liens, which may result in a more conservative
estimate of historical homeowner equity. We only considered open
mortgages that were current or 30–180 days delinquent as of the
fourth quarter of 2011.

To further analyze mortgage performance trends, we analyzed data from
industry groups, federal agencies, and the enterprises. Specifically, we
tracked and analyzed forbearance, delinquency, loss mitigation, and
foreclosure trends in weekly and monthly reports published by Black
Knight (a mortgage data provider) that summarized its Mortgage Monitor
reports, and weekly press releases published by the Mortgage Bankers
Association (an industry group representing the real estate finance
industry) that summarized its Forbearance and Call Volume Survey. 9 In
addition, we collected and analyzed data from FHA, RHS, and the
enterprises on the disposition of borrowers after forbearance, such as the

9See, for example, Black Knight, Mortgage Monitor: February 2021 Report, Apr. 5, 2021,
https://cdn.blackknightinc.com/wp-
content/uploads/2021/04/BKI_MM_Feb2021_Report.pdf; and Mortgage Bankers
Association, Share of Mortgage Loans in Forbearance Decreases to 5.20 Percent, Mar. 8,
2021, https://www.https://www.mba.org/2021-press-releases/march/share-of-mortgage-
loans-in-forbearance-decreases-to-520-percent. For both data sources, we interviewed
knowledgeable representatives and reviewed technical documentation. We found both
data sources to be sufficiently reliable for describing forbearance and loan performance
trends.

Page 40 GAO-21-554 COVID-19 Housing Protections
Appendix I: Objectives, Scope, and
Methodology

percentage that remained delinquent or used available loss mitigation
options. 10

To inform all objectives, we interviewed officials from CFPB, FHA, FHFA,
RHS, VA, and the enterprises. We also reviewed documentation we
collected from them, such as loss mitigation and mortgage servicing
guidelines. In addition, we reviewed relevant sections of the CARES Act
and American Rescue Plan Act of 2021, as well as federal mortgage
servicing regulations.

Lastly, we interviewed a selection of stakeholders to inform our
background research and identify emerging issues. We selected these
stakeholders based on internal and stakeholder recommendations to
ensure appropriate coverage of relevant parties. These stakeholders
were the Brookings Institution, Falcon Capital Advisors, Housing Policy
Council, Mortgage Bankers Association, National Consumer Law Center,
National Council of State Housing Agencies, National Fair Housing
Alliance, National Housing Law Project, National Housing Resource
Center, National Low Income Housing Coalition, and National Multifamily
Housing Council.

10VA was not able to provide data we requested on loss mitigation options and
delinquency status after forbearance. For data collected from the agencies and
enterprises, we interviewed knowledgeable agency and enterprise officials and found
each data source to be sufficiently reliable for describing loss mitigation and delinquency
trends.

Page 41 GAO-21-554 COVID-19 Housing Protections
Appendix II: GAO Contacts and Staff
Appendix II: GAO Contacts and Staff
Acknowledgments

Acknowledgments

John H. Pendleton, (202) 512-8678 or pendletonj@gao.gov
GAO Contact
In addition to the contact named above, Cory Marzullo (Assistant
Staff Director), Brandon Kruse (Analyst in Charge), Marianne Anderson, Silvia
Acknowledgments Arbelaez-Ellis, Chelsea Carter, Lilia Chaidez, Justin Fisher, John McGrail,
Marc Molino, Shenandoah Sowash, Matthew Rabe, and Farrah Stone
made key contributions to this report.

(104751)
Page 42 GAO-21-554 COVID-19 Housing Protections
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