June 30: Is California’s eviction tsunami coming?

California’s eviction moratorium is coming to an end June 30. Since the earliest days of the pandemic, housing analysts have worried about a tsunami of evictions whenever the state lifts protections for renters. 

Will there be an eviction tsunami when the moratorium ends? Or a smaller wave? CalMatters asked Carolina Reid, associate professor of city and regional planning at the University of California, Berkeley. The following interview has been lightly edited for clarity and length. 

Q. A few months back, we discussed a potential eviction cliff. Are we still headed for that cliff?

A. Gov. Gavin Newsom’s recent announcement that California would cover 100% of rent owed by tenants is welcome news, and will help to mitigate the worst impacts of the pandemic on rental households. Depending on the timing of those payments, the ending of the eviction moratoria on June 30 may be less of a cliff than many believed.

But it is unclear whether a) the relief will get to all households that need it soon enough and b) the funds are sufficient to pay back owed rent.

There’s also the question of how long it will take to see jobs and wages back in full, and whether households took on other forms of unsustainable debt — for example, through credit cards or other higher cost products like payday loans — to make ends meet during the pandemic.

How many people are at risk in the eviction tsunami? How much will they owe?

A. Analysis by PolicyLink suggests that about 900,000 households in California are behind on rent, with an average of $4,600 in rental arrears.

The Federal Reserve Bank of Philadelphia’s estimates of rental debt are higher – they estimate that nationally, the average amount of rental arrears (for those who are not paid up on their rent) is closer to $8,000.

In a new study we’re about to release next week, we look at the actual rental debt for households living in subsidized housing — those who benefit from below-market rents. And even there, a small proportion of those who are behind on rental payments have accumulated more than $5,000 in rental debt. So I think these other estimates are reasonable averages, though of course some families may owe much more.

Our study also shows that families are struggling with food costs, and may be struggling to pay rent because they’re also assisting families who may have more need. Even though things are starting to open back up, I think a lot of families are still really reeling from both the economic and emotional impact of this crisis.

What are you seeing in the Census Household Pulse Survey that has been conducted during the pandemic? What do the surveys suggest could happen when the moratorium lifts?

A. The survey results have been quite consistent over time – there’s been some improvement in recent waves, and there is some volatility around the estimates because of small sample size, but in general, about 12% to 15% of renters in California report being behind on rent, and just over a third think they are very or somewhat likely to be evicted in the next two months.

Q. What do we know about the demographics of the people at risk of eviction?

A.The risks of eviction and homelessness are significantly higher for Black, Hispanic, and indigenous households – across every measure and in every dataset, we see higher rates of vulnerability to eviction, including income losses and higher rates of rental delinquencies. In our new study, we also see the dramatic impact of this crisis on households with children, particularly single-parent households. More than three times as many single-parent households with children were behind on rent in comparison to households without children. This is deeply concerning, since we know that the impacts of housing instability, insecurity and homelessness have a significant negative impact on children’s health, educational outcomes and well-being.

Q. What are the risks for families beyond the actual eviction process? What are some of the impacts of eviction?

A. Recent studies on eviction show how disruptive it is, not only in the short term in terms of loss of housing and housing instability, but also over the long term. It greatly increases the likelihood of homelessness, but it can also lead to a cycle of housing insecurity and instability.

It also increases negative health outcomes and health care costs. It lowers credit scores, so it can serve as a barrier to finding new housing or employment and can raise the costs of borrowing for a car.

This article is part of the California Divide, a collaboration among newsrooms examining income inequality and economic survival in California.

Villa Park softball pitcher Sydney Somerndike named state player of the year by Gatorade

Villa Park junior Sydney Somerndike has been selected the Gatorade California Softball Player of the Year, it was announced Friday, June 18.

Somerndike, a 5-foot-7 pitcher who has committed to Arizona, has a 24-2 record in the circle with 323 strikeouts in 157 innings. She has allowed just 57 hits and 30 walks. She also has a .337 batting average with five home runs, 18 RBIs and a .600 slugging percentage.

Somerndike is expected to start for the Spartans (24-2 overall) on Saturday night in the CIF-SS Division 2 championship game against Upland at Bill Barber Park in Irvine. It is the first time Villa Park has played in a softball final since 1979.

The junior is now a finalist for the Gatorade National Softball Player of the Year award.

When buying a home, the devil is in the details

One of the contingencies written into the Residential Purchase Agreement in California is Section 13 – Title and Vesting.

It specifies:

“Title is taken in its present condition subject to all encumbrances, easements, covenants, conditions, restrictions, rights and other matters, whether of record or not.”

The section goes on to list the following exceptions: monetary liens of record (which seller is obligated to pay off) unless buyer is assuming those obligations or taking the property subject to those obligations; and those matters which seller has agreed in writing to remove.

For buyers, this means that when you receive a copy of the Preliminary Title Report (known in industry jargon the as “the prelim”) in the beginning of your escrow, you should read it.

Yes, there might be some language that you are not familiar with, some new terms and some legal notations you don’t understand. That’s okay. There are resources to help you.

Here’s a brief breakdown of what might show up on the prelim and whom you might ask for clarification.

The water, electric, gas and cable companies often have easements to access their infrastructure, devices and meters on your prospective property. You can’t fight these, nor do you want to, in most cases. This is just a disclosure that people from these entities are allowed access to your property to keep their services in working order or to prevent disaster.

If the property is in a planned unit development like a condo complex or a gated community, there might be a homeowner’s association with covenants, conditions, and restrictions dictating what you can and can’t do outside and around your home. You will receive the documentation of these during escrow, and you should read those as well.

If you have any questions, there will be a contact phone number for the HOA or property management company. Don’t hesitate to contact them.

If the current owners have a mortgage, this will show up on the prelim with the original loan amount and the date it was issued. This may not be the amount the sellers currently owe, especially if the loan was taken out several decades ago. If this is a concern or a curiosity to you, you might call your escrow officer to find out the current loan balance.

Finally, if there are liens on the property, these will have to be resolved before the Title Insurance Policy can be issued.

Who can put a lien on real property?

Well, for starters, the Internal Revenue Service and the California Franchise Tax Board for any unpaid back taxes. The homeowner’s association can also record a lien for any unpaid HOA dues.

And let’s not forget the Department of Justice, which can place a lean on the property for any unpaid judgments.

If any of these show up on the prelim, call your agent or your escrow officer to find out how the seller is planning to clear them off of the title and how long that is likely to take.

Leslie Sargent Eskildsen is an agent with RealtyOne Group West. She can be reached at 949-678-3373 or leslie@leslieeskildsen.com.

Another victory at the Supreme Court for religious groups

By JESSICA GRESKO

WASHINGTON (AP) — In another victory for religious groups at the Supreme Court, the justices on Thursday unanimously sided with a Catholic foster care agency that says its religious views prevent it from working with same-sex couples. The court said the city of Philadelphia wrongly limited its relationship with the group as a result of the agency’s policy.

The ruling was specific to the facts of the case, sidestepping bigger questions about how to balance religious freedom and anti-discrimination laws. Instead, the outcome turned on the language in the city’s foster care contract. Three conservative justices would have gone much further, and LGBTQ groups said they were relieved that the decision was limited.

Chief Justice John Roberts wrote for a majority of the court that Catholic Social Services “seeks only an accommodation that will allow it to continue serving the children of Philadelphia in a manner consistent with its religious beliefs; it does not seek to impose those beliefs on anyone else.”

Roberts concluded that Philadelphia’s refusal to “contract with CSS for the provision of foster care services unless it agrees to certify same-sex couples as foster parents … violates the First Amendment.”

Roberts noted that no same-sex couple has ever asked to work with Catholic Social Services, which is affiliated with the Archdiocese of Philadelphia. If that were to happen, that couple would be referred to one of the more than 20 other agencies that works with same-sex couples, Catholic Social Services has said.

“For over 50 years, CSS successfully contracted with the City to provide foster care services while holding to these beliefs,” said Roberts, one of seven members of the court who is Catholic or attended Catholic schools.

Because of its beliefs, the Catholic agency also does not certify unmarried couples.

In recent years, religious groups have been delighted by victories at the court, often by wide margins. That includes cases in which the court lifted a ban on state aid to religious schooling, gave religious schools greater leeway to hire and fire teachers and allowed a cross to remain on public land. More recently, the court repeatedly sided with religious groups in fights over coronavirus restrictions.

Philadelphia learned in 2018 from a newspaper reporter that Catholic Social Services would not certify same-sex couples to become foster parents. The city has said it requires the foster care agencies it works with not to discriminate as part of their contracts. The city asked Catholic Social Services to change its policy, but the group declined.

As a result, Philadelphia stopped referring additional children to the agency. Catholic Social Services sued, but lower courts sided with Philadelphia.

In coming to the conclusion that Philadelphia had acted improperly, Roberts said the city gave Catholic Social Services a choice between “curtailing its mission or approving relationships inconsistent with its beliefs.”

He also pointed to language in the city’s standard foster care contract. The contract says that agencies cannot reject prospective foster or adoptive parents based on their sexual orientation “unless an exception is granted.” Because the city created a process for granting exemptions, it cannot then deny Catholic Social Services an exemption, Roberts concluded.

The case’s outcome was similar to a 2018 decision in which the court sided with a Colorado baker who would not make a wedding cake for a same-sex couple. That decision, too, was limited to the specific facts of the case and dodged bigger issues of how to balance religious freedom and anti-discrimination laws. But the court has grown more conservative since that ruling.

In “both cases the court reached narrow, very fact-specific decisions that leave non-discrimination laws and policies standing and fully enforceable by governments,” said Leslie Cooper, deputy director of the American Civil Liberties Union LGBTQ & HIV Project, which was involved in the case on Philadelphia’s side.

Three conservative justices who joined Roberts’ opinion said they would have gone further. Justices Samuel Alito, Clarence Thomas and Neil Gorsuch said they would have overruled a 1990 Supreme Court decision that they said improperly allows limits on religious freedom.

Alito called the court’s ruling Thursday a “wisp of a decision.” Gorsuch said it was an “(ir)resolution,” predicting that the litigation would continue, with the city perhaps rewriting its contract.

Philadelphia City Solicitor Diana Cortes said the ruling was a “difficult and disappointing setback.”

In a statement, she said the court had “usurped the City’s judgment that a nondiscrimination policy is in the best interests of the children in its care.” But she said the city was also “gratified” that the justices did not “radically change existing constitutional law to adopt a standard that would force court-ordered religious exemptions from civic obligations in every arena.”

A lawyer with The Becket Fund for Religious Liberty who argued the case on behalf of Catholic Social Services called it a “common-sense ruling in favor of religious social services.”

“The Supreme Court recognized that CSS has been doing amazing work for many years and can continue that work in the city of Philadelphia,” Lori Windham said.

___

Associated Press writer Mark Sherman contributed to this report.

Self-employed borrowers still struggle to qualify for government-backed loans

Last week, Fannie Mae started a new program named Refi Now to help low-income borrowers with high debt qualify for a mortgage.

The standard for well-qualified borrowers is debt should amount to less than 50% of their income. Under Refi Now, qualifying debt-to-income ratios rise to an astronomical 65%.

Ok. Fair enough. But how about also cutting a break for self-employed borrowers with high debt?

It looks like the answer for them is Refi Never.

Draconian COVID-19 self-employment underwriting restrictions from Fannie Mae (and Freddie Mac) implemented exactly one year ago still stand today.

The COVID focus became all about your business then and right now.

In addition to providing at least one year’s business tax returns, borrowers were required to provide interim financial statements.

Year-to-date profit-and-loss statements had to stay on pace with last year’s income. Underwriters assumed year-to-date income dips indicated the borrowers’ business was circling the drain.  Deny credit now. Abort.

The new rules killed the prospects for getting cheaper mortgage for too many.

For example, my shop turned away roughly half of self-employed borrowers because they could not qualify for a loan. Yes, half.

Year-to-date profit and loss statements became an underwriting obsession. Some lenders allowed no tolerance for an income dip. Others said no dice with more than a 10% dip. And at least one lender I know of allows up to a 25% dip so long as the borrower still qualifies with the income dip.

Worthy purchase and refinance borrowers wanting cheap Fannie and Freddie rates were also required to walk their mortgage loan originators through the granular details of the business bank statements that coincided with their P&L’s. What better truth serum for Fannie and Freddie than something bordering on a forensic audit?

Self-employed applicants were offended by the scrutiny. It was like a financial cavity search. But they put up with it because they wanted the lowest mortgage rates in modern history.

Others just said no. A few expressed their anger in words unacceptable to provide to you.

How else could lenders decipher the financially strong applicants from the weak ones? Better safe than sorry in the eyes of F & F.

Yes, plenty of businesses crashed, burned and shut down. But plenty have survived and thrived through good fortune or government support like the PPP program.

Business bankruptcy attorney Richard Golubow of Winthrop, Golubow and Hollander pointed out that less gross revenue can still translate to more profits due to less travel, reduced office overhead and no entertainment expenses during COVID.

“People worked harder,” said Golubow.

Business bankruptcy filings are trending down. The U.S. saw Chapter 11 and Chapter 13 business bankruptcy filings decrease about 19% in 2020 from the year before, according to Epiq AACER Bankruptcy Information Services. Year-to-date, 2021 filings are down more than 30%.

California business BK numbers were down about 40% in 2020, with filings down another 10% this year so far, Epiq AACER figures show.

As of this week, mortgage forbearances are down to 4.16%, according to the Mortgage Bankers Association. Forbearance numbers were 8.55% one year ago.

More than 14 million borrowers could save an average of $283 per month by refinancing, according to mortgage data firm Black Knight. California has almost 1.9 million of those candidates who could save an average of $386 per month. The counties of Los Angeles, Orange, Riverside and San Bernardino have 952,000 borrowers who are ripe for refinancing.

How many are self-employed borrowers whom Fannie and Freddie could assist?

Officials with mortgage regulator Federal Housing Finance Agency couldn’t be reached for comment about whether Fan and Fred will go back to the pre-COVID self-employment underwriting rules.

Freddie Mac rate news: The 30-year fixed rate averaged 2.96%, 3 basis points lower than last week.  The 15-year fixed rate averaged 2.23%, 4 basis points down from last week.

The Mortgage Bankers Association reported a 3.1% decrease in mortgage application volume from the previous week.

Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $548,250 loan, last year’s payment was $74 more than this week’s payment of $2,300.

What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages with 1-point cost: A 30-year FHA at 2.25%, a 15-year conventional at 1.99%, a 30-year conventional at 2.625%, a 15-year conventional high-balance ($548,251 to $822,375) at 2.125%, a 30-year conventional high-balance at 2.75% and a jumbo 30-year fixed at 2.75%.

Eye catcher loan of the week: A 30-year fixed at 3% without cost.

Jeff Lazerson is a mortgage broker. He can be reached at 949-334-2424 or jlazerson@mortgagegrader.com. His website is www.mortgagegrader.com.