Laila Mary Grace Heiss

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3. COMPARE SOME OF THE LENDER AND/OR GOVERNMENT SOLUTIONS DISCUSSED ABOVE AND OTHER POSSIBLE APPrOACHES IN SIMILAR SITUATIONS – Compare the solutions offered by New York State and the Federal Government discussed above to deal with Covid-caused mortgage defaults. Which in your opinion offers the best solution? The CARES Act, HAF, NYSHAF, NYS Business Law Rule 9-X and/or RESPA Regulation-X Amendments all took different approaches at different times and at different stages of the Covid-19 Pandemic. Compare these to each other and to the Government’s dealing with defaulted home mortgages in other crises such as natural disasters, economic downturns, and general home mortgage help to vulnerable persons in society. Compare the remedies used in this health and economic driven mortgage crisis to the ones used in the last recession and the last mortgage crisis, caused by high risk lending, when the Homeowner Assistance Modification Program (“HAMP”) and other programs to help persons with mortgage arrears were offered by the Federal Government. Compare the Covid-19 programs discussed to ones given by the Government to homeowners encountering other disasters and emergencies. Tell Us: How do you compare these government responses to Covid caused homeowner mortgage defaults and contrast and compare these programs to each other and to other possible approaches actually used by the Federal Government and/or other States in this or other similar situations.
Answer: The economy and a heart monitor have a lot more in common than you think. Both have peaks and both have valleys. If instead of the lines moving up and down, they lay flat, something definitely went wrong somewhere. In both situations, the peaks and valleys are caused by the expansion and contraction of the heart or the economy. The economy is the heart of our world, almost every function performed by society is driven by economic status. From charities to business to the government, it all revolves around the economy’s fluctuations just as a body revolves around the heart’s fluctuations. When the heart takes a hit, the body reacts. When the economy takes a hit, society reacts.
In 2020, the economy took a huge hit. The rise of Coronavirus threatened American lives. As a result, the US decided to declare a state of emergency and began a lockdown, instructing those who were able to, to stay at home and avoid as much contact with individuals outside their home as possible. Businesses both small and large temporarily shut down, schools transitioned to online, and those who had the option to work from home did. The only establishments that remained open and functional were ones that were essential such as grocery stores, hospitals, and first responders. Many people either lost their jobs completely due to businesses permanently shutting down or were temporarily laid off until businesses began to open back up. The unemployment rate which had been slowly dropping since the end of the recession in 2009, skyrocketed from 3.5% in February to its peak of 14.8% in April. The 2020 Covid-19 recession may have been the shortest recession period, but it also had the highest ever recorded unemployment rate. The American people were struggling.
Part of the government’s responsibilities is to help keep its citizens from drowning in crisis. For example, during the Great Depression, many US citizens were undergoing great hardships and doing just about anything to make ends meet. To help keep the US afloat, the US president at the time, Franklin Delano Rosavent, came up with many New Deal Programs to provide support for those who needed it and to help bring the US out of the depression. One of these New Deal Programs was The Housing Act of 1934. This Act helped to insure mortgages and helped stabilize the housing market. Similarly, with the Covid-19 recession, the government stepped in to help citizens recover from the economic repercussions that followed the lockdown. The government also helps citizens in times of natural disasters. For homeowners that get their mortgage through federally backed entities, such as Freddie Mac or Fannie Mae, if home damage occurs during a natural disaster then qualifying borrowers are able to put their loan through a forbearance plan with no late fees. The measures the government took during the Covid-19 recession were not designed to sustain the country, but rather to help the individuals who needed a little bit of temporary support to get them through the crisis. This responsibility fell on both state and federal governments.
One of the measures that the federal government took to help people was called the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act. This act was passed by Congress on March 25, 2020, shortly after observing the effects that the lockdown had on the economy and the US citizens that rely on the economy. The CARES Act provided temporary relief to both large corporations and small businesses as well as individual citizens. In total, $2 trillion was distributed, with different amounts allotted to separate groups including state and local governments. This money was meant to help support those who needed it and to boost economic activity to hopefully get the blood pumping through the economy once again.
Another measure that the federal government took was called the Homeowners Assistance Fund also known as the HAF. While the CARES Act was designed to provide aid in general, the HAF was designed specifically for those struggling to pay their mortgage due to Covid-19 recession-related reasons. There was almost $10 billion allocated specifically for this fund to provide qualifying homeowners with up to $50,000 paid to their mortgage company to help avoid foreclosures.
In addition to the federal government helping people in all states and US territories throughout the Covid-19 recession period, the state governments also provided aid to their residences. The state of New York decided to implement its own HAF and came up with the New York State Homeowners Assistance Fund, more commonly known as the NYSHAF. The NYSHAF also granted qualifying homeowners $50,000 to help pay the mortgage and other home expenses. However, funds ran dry in less than 2 months due to distribution being on a first come first serve basis. While this program was federally funded, it was not a federal program but rather a state program.
Another example of some of the measures that individual states took to help their citizens during the Covid-19 Recession is the New York State Section 9-x, or NYS Rule 9-X. Unlike most other measures taken during this time, NYS Rule 9-X was not specifically designed to be temporary. The Rule does a couple of different things for loan borrowers in the state of New York. It allows them to apply for a loan forbearance for 180 days that can be prolonged for up to 360 days with additional proof of continuing need. It also creates 4 post loan forbearance options to make paying the rest of the borrower’s loan easier.
The general goal of these 4 programs was to administer aid in a time of crisis for the US. The majority of them apply strictly to loans providing either direct aid in the form of a grant or allowing forbearance on their loans. The CARES Act is a little different in this aspect because it doesn’t necessarily apply to loans and the individuals who receive funding from the Act can use the grant for whatever they need to. Both the CARES Act and the HAF are federal programs whereas the NYSHAF and the NYS Rule 9-X are state programs.
Every time the government steps in to provide aid in times of hardship, they do so in a different way specially molded to fit every crisis. Similar to how heart disease is treated, different afflictions need different treatments. Not only were the methods used during the Covid-19 recession different from each other, but they were also different from the methods used in other recessions. For example, during the last recession, the government took steps to return economic action back to normal by reducing interest rates on loans with the goal of boosting consumer activity to keep cash flowing through the veins of the economy. Another time the government took measures to help was the last mortgage crisis. During the last mortgage crisis, the government implemented new programs such as the Home Affordable Modification Program, also known as HAMP, which permits qualifying homeowners to modify their mortgage to fit their needs and make it more affordable. These programs were designed to fit each specific crisis to provide the most aid possible to those that need it.
The Covid-19 recession had lots of different relief programs because there were lots of different areas that people were struggling in and needed help. Because there were so many different reasons people needed help, the program that offered the best solution was the CARES Act. This was the best solution because the resulting grants could be used for whatever the recipient needed to use them for. Some people struggled to pay mortgages and some struggled just to put food on the table day after day. It is for this reason that not all of the programs were helpful to those that needed it. Some people didn’t have trouble paying the mortgage or rent because they didn’t need to but they did need help with other things which is why the CARES Act ultimately offered the best solution because any funds received could be used how the recipient saw fit.
These programs reflect that the relationship between the government and the economy is like the relationship between a cardiologist and a heart. When conditions are normal and as they should be, the heart functions properly and circulates blood throughout the body. Exactly how when conditions are normal and as they should be, the economy functions properly as cash circulates through the US. However, when everything isn’t working perfectly, if the cardiologist doesn’t step in to help and correct the problem, it can affect the entire body and lead to a downward spiral with some not-so-good results. Again, this is just like how if the government doesn’t step in when things aren’t working perfectly in the economy, it can lead to even more problems for the whole US. Sometimes, a heart needs a little shock to get it started back up. That’s essentially what these programs aimed to do. When the economy was struggling, it needed a little stimulus to get it started back up.

Works Cited
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Inclusive Housing Market.” Brookings, 9 Mar. 2022, www.brookings.edu/research/lessons-from-the-financial-
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“Cares Act.” Wikipedia, 13 June 2023, en.wikipedia.org/wiki/CARES_Act#Relief_to_individuals.
Chase, J.P. Morgan. “The Effects of Recessions on Mortgages.” Chase, 27 May 2021,
www.chase.com/personal/mortgage/education/financing-a-home/effects-of-recessions-on-mortgages.
“Homeowner Assistance Fund (HAF).” Mass.Gov, www.mass.gov/info-details/homeowner-assistance-fund-haf.
Accessed 13 June 2023.
“Homeowner Assistance Fund.” U.S. Department of the Treasury, 12 June 2023, home.treasury.gov/policy-
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“Mortgage Relief for Homeowners.” Disaster Assistance | Federal Housing Finance Agency, 25 Aug. 2022,
www.fhfa.gov/Homeownersbuyer/MortgageAssistance/Pages/Disaster-Assistance.aspx.
“National Mortgage Crisis of the 1930s.” Wikipedia, 30 Jan. 2023,
en.wikipedia.org/wiki/National_Mortgage_Crisis_of_the_1930s#:~:text=In%201934%2C%20as%20part%20of%20the%20New%20Deal%2C,which%20failed%20during%20the%20Savings%20and%20Loan%20Crisis%29.
“Unemployment Rates during the COVID-19 Pandemic – CRS Reports.” Congressional Research Service , Aug.
2021, crsreports.congress.gov/product/pdf/R/R46554.
“What’s in The Cares Act? Here’s a Summary.” Peter G. Peterson Foundation, 22 Apr. 2020,
www.pgpf.org/infographic/whats-in-the-cares-act-heres-a-summary.