New loan modifications aim to keep more borrowers in their homes
The Biden administration is offering delinquent borrowers new loan modifications and payment reductions in a bid to help them stay in their homes after the foreclosure moratorium expires on July 31.
The White House on Friday said that homeowners with government-backed mortgages that have been negatively impacted by the pandemic will receive enhanced assistance. The new steps aim to extend the length of their mortgages up to 40 years and lower monthly principal and interest (P&I) payments by 25% to ensure borrowers can afford to stay in their homes.
The additional options come a month after the Centers for Disease Control and Prevention extended the nationwide eviction and foreclosure bans until the end of July, which CDC director Dr. Rochelle Walensky promised would be the last time they would do so.
Under the moratorium, homeowners with federally guaranteed mortgages can miss monthly payments for up to 18 months without penalty and repay them later. That relief is set to expire in September for borrowers who entered into forbearance plans early in the pandemic. Certain borrowers earning less than before the pandemic who can’t resume their regular monthly payments are given up to three months of additional forbearance.
“Today, approximately 1.75 million Americans remain in forbearance,” the White House said in a statement. “In order to ensure a stable and equitable recovery from the disruptions of the COVID-19 pandemic and prepare for homeowners to exit mortgage forbearance, the Biden-Harris Administration is taking action to keep Americans in their homes and support a return to a more stable housing market.”
Deferring mortgage payments, lowering interest rates, or extending mortgage terms have been effective in helping homeowners strapped for cash during an economic recession, according to the Wall Street Journal, citing research examining the 2008-09 financial crisis.