The Biden administration announced Friday that it will provide assistance for borrowers who fell behind on their mortgage payments due to the COVID-19 pandemic, in an effort to help prevent mortgage foreclosures.
President Joe Biden said that for homeowners with loans backed by the Department of Housing and Urban Development (HUD), the Department of Agriculture (USDA) and the Department of Veterans Affairs (VA), the administration would provide a 25% reduction in monthly principal and interest payments. This is in order to ensure they can afford to remain in their homes and continue to build equity.
If you're struggling to make your mortgage payments after the coronavirus pandemic, refinancing your home loan is another option. Check out Credible if you're interested in seeing what's available for mortgage refinancing and how you can lower your monthly payments.
The administration’s announcement follows previous government assistance that was offered to homeowners. At the end of June, the administration extended its foreclosure moratorium for a final time until July 31, and the mortgage forbearance enrollment window through Sept. 30. It also added up to three months to its forbearance plan option for some borrowers with mortgages backed by the Department of Housing and Urban Development, the Department of Agriculture and the Department of Veterans Affairs.
If you're experiencing financial hardship and want to see what your options are, refinancing your mortgage could be something to consider, as it could help you save hundreds on your monthly payment. Visit Credible to compare multiple lenders at once and see which one is the best fit for you.
The Biden administration is now offering borrowers loan modifications and payment reductions to help them stay in their homes.
"Many homeowners will need deeper assistance due to pandemic-related income loss," the administration said in a statement. "For example, due to the economic crisis caused by the pandemic, some homeowners are earning less than they were before the pandemic."
The administration explained its 25% reduction in principal and interest payments will result in fewer foreclosures in the coming months and brings these government-backed loans in line with the options offered for loans from Fannie Mae and Freddie Mac.
Over the coming months, the administration will initiate the following mortgage relief options for mortgages backed by the Federal Housing Administration (FHA):
- COVID-19 recovery standalone partial claim: This option is for homeowners who can resume their current mortgage payments, offering them a 0% interest subordinate lien to pay back missed payments that can be repaid when the mortgage ends, such as when the home is sold or refinanced.
- COVID-19 recovery modification: If homeowners cannot resume their monthly payments, mortgage servicers can extend the term of the mortgage to 360 months at the market rate, with the goal of reducing their monthly mortgage payments by about 25%.
Another option to reduce your mortgage payments and help you save money is by refinancing your home loan, especially since interest rates are hovering near historical lows. Visit Credible to find out what options are available and get prequalified without affecting your credit score.
For USDA and VA options, the administration provided new alternatives such as interest rate reduction, term extensions and mortgage recovery advances with the goal of reducing payments by about 20%.
Homeowners with mortgages backed by the FHFA can already receive help by opting to defer the missed payments to the end of their mortgage, modify their loan terms, extend their mortgage up to 40 years and more that could potentially decrease their payments by up to 20%.
Borrowers should contact their mortgage lender or servicer to see what options are available to them. They can also contact Credible to speak to a home loan expert and get all of their questions answered.
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