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The Biden administration announced news on Friday housing assistance measures to help prevent foreclosures for homeowners with government guaranteed loans.
With the mortgage forbearance programs put in place during the pandemic coming to an end, the Biden administration said in a statement that these new measures will prepare homeowners to move out of forbearance and “keep Americans at home and support a return to a more stable housing market. “
Homeowners coming out of forbearance and no longer facing financial hardship from the pandemic will continue to be offered options that move missed payments to the end of the mortgage at no additional cost. However, the White House recognizes that many Americans still need help deeper than this.
“Homeowners with government guaranteed mortgages who have been negatively affected by the pandemic will now receive enhanced assistance,” the White House statement said. The press release describes the new actions taken by the Department of Housing and Urban Development (HUD), the Department of Agriculture (USDA) and the Department of Veterans Affairs (VA). These agencies will now offer “an approximate 25% reduction in borrowers’ monthly principal and interest (P&I) payments to ensure they can afford to stay in their homes and build long-term equity. “.
The change brings HUD, USDA and VA guaranteed mortgages closer to similar relief options previously available to borrowers from Fannie Mae and Freddie Mac.
The White House says these actions “will help more borrowers keep their homes, prevent future defaults, help more low-income and underserved borrowers build wealth through home ownership. ownership and contribute to the broader recovery from COVID-19 â.
Near 7.2 million American families has taken advantage of forbearance options since the US government implemented forbearance measures. The number of households subject to forbearance has declined by 50% from the pandemic peak, the Biden administration said. Yet nearly 1.75 million Americans remain in abstention.
How to use these programs
Mortgage agents are encouraged to work proactively with eligible borrowers and provide the options described below. But if you’re having trouble making your mortgage payments and you’re not sure if you qualify, you should contact your loan officer directly and ask if you qualify for any of these options.
New loan modification and payment reduction options
The new HUD guidelines, which apply to all homeowners with FHA loans, require borrowers affected by COVID-19 to be offered a no-charge option to resume mortgage payments. FHA borrowers who cannot resume their monthly payments may be eligible for a 25% reduction in their P&I payment as part of a loan modification. This relief will be offered through two specific programs:
- Change in COVID-19 recovery: If you can’t resume your monthly mortgage payments, you can extend the mortgage term to 360 months at current market rates, with the goal of reducing the monthly P&I portion of your mortgage payment by 25%.
- COVID-19 Autonomous Partial Recovery Claim: FHA borrowers who can resume their monthly payments have the option of continuing those payments and covering their missed payments with a zero interest secondary loan. This loan is paid off when you sell the house or refinance your mortgage.
USDA COVID-19 Special Relief Action: Eligible USDA loan borrowers can access a combination of:
- Up to 20% reduction in P&I payments
- Interest rate reduction
- Extension of term
- Mortgage recovery advance to help cover overdue mortgage payments
Veterans Affairs (VA) COVID-19 reimbursement change: Helps eligible VA borrowers access 20% or more reduction in monthly P&I payments.
The above options for homeowners with FHA, USDA, and VA loans are new and designed to complement the following protections already in place:
Homeowners Assistance Fund (HAF): President Biden’s US bailout is providing $ 9.961 billion to homeowners whose finances have been negatively affected by COVID-19. These funds will be incorporated into the payment reduction options and can be used for mortgage payment assistance, home insurance or utility payments.
Extended term option: The Government National Mortgage Association (Ginnie Mae) is working on a security product that allows government agencies, such as the FHA and HUD, to extend the terms of mortgages up to 40 years. This option, combined with the monthly payment reduction program, may be suitable for borrowers behind on their mortgage and can benefit from the reduction in monthly payments associated with this option. The downside is that the long-term product shouldn’t be available until the end of the year.
Relief opportunities for borrowers who are not currently in forbearance
- HUD, VA, and USDA will continue to allow homeowners to initiate COVID-related forbearance requests until September 30, 2021.
- Fannie Mae or Freddie Mac mortgages will continue to be eligible for forbearance related to COVID.
The Consumer Finance Protection Bureau (CFPB) offers more information on relief options, protections and important deadlines on his website.