Biden Administration Announces New Precautions to Prevent Foreclosure

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The Biden administration on Friday announced a new housing assistance measures to help prevent foreclosure for homeowners with government loans.

With the end in sight mortgage waiver programs The Biden administration said in a statement that, introduced during the pandemic, these new measures will prepare homeowners to move away from abstinence and “keep Americans in their homes and support a return to a more stable housing market.”

Homeowners who are out of mortgage deferral and no longer face the financial hardships of the pandemic will continue to be offered options to move missed payments to the end of their mortgage at no additional cost. However, the White House acknowledges that many Americans still need deeper help than this.

“Homeowners with government-backed mortgages who have been hit by the pandemic will now receive expanded assistance,” the White House said in a statement. The press statement outlines new measures 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 provide “an approximately 25% reduction in monthly principal and interest payments (P&I) to borrowers so they can afford to stay in their homes and build capital over the long term.”

The change brings HUD, USDA and VA backed mortgages more closely aligned with similar relief options previously provided to borrowers Fannie Mae and Freddie Mac.

The White House says the action “will help more borrowers keep their homes, prevent future re-defaults, help more low-income, underserved borrowers accumulate wealth through home ownership, and help in a broader recovery from COVID-19.”

Near 7.2 million American families took advantage of tolerance options as the US government adopted tolerance measures. The Biden administration said the number of households in tolerance has dropped 50% since the peak of the pandemic. However, nearly 1.75 million Americans remain patient.

How to use these programs

Mortgage companies are encouraged to actively work with eligible borrowers and provide the options described below. But if you find yourself struggling to make your mortgage payments and are not sure if you qualify, you should contact your loan agent directly and ask if you are eligible for any of these options.

New options for changing loans and reducing payments

FHA loans

New HUD rules that apply to all homeowners with FHA loansrequire borrowers affected by COVID-19 to be offered a free option to resume mortgage payments. FHA borrowers who are unable to resume their monthly payments may be eligible for a 25% reduction in their P&I payment as part of the loan modification. This relief will be offered through two special programs:

  • COVID-19 recovery modification: If you are unable to renew your monthly mortgage payments, you can extend your mortgage to 360 months at current market rates to reduce the monthly P&I portion of your mortgage payment by 25%.
  • Standalone COVID-19 Recovery Partial Claim: FHA borrowers who can resume their monthly payments have the option to continue those payments and cover their missed payments with an interest-free secondary loan. This loan is paid off when you sell your home or refinance your mortgage.

USDA loans

USDA Special Action Against COVID-19: Having a right USDA Loan borrowers can access a combination of:

  • Reduction of payments on profit and loss up to 20%
  • Lower interest rate
  • Prolongation of the term
  • Mortgage Loan Repayment Advance to Cover Overdue Mortgage Payments

VA Credits

Veterans Affairs (VA) COVID-19 Return Modification: Matching assists VA Borrowers to access a 20% or more reduction in monthly P&L payments.

The above options for homeowners with FHA, USDA and VA loans are new and are intended to complement the following already existing protections:

Additional help

Homeowners Assistance Fund (HAF): President Biden’s American bailout plan provides $ 9.961 billion to homeowners whose finances have been negatively impacted by COVID-19. These funds will be integrated into payment reduction options and can be used to help pay off mortgages, homeowner insurance, or utility bills.

Extended option: The National State Mortgage Association (Jeannie Mae) is working on a security product that allows government agencies like the FHA and HUD to extend mortgage loan terms up to 40 years. This option, combined with the monthly payment reduction program, may be suitable for borrowers who are delaying their mortgage payments and may benefit from the monthly payment reductions associated with this option. The downside is that the extended life product will not be available until the end of this year.

Opportunities to assist borrowers who currently do not need patience

  • HUD, VA and USDA will continue to allow homeowners to file COVID abstinence applications until September 30, 2021.
  • Fannie Mae or Freddie Mac mortgages will continue to be eligible for COVID abstinence.

Other sources

The Consumer Protection Bureau (CFPB) offers more information on assistance options, protection and important deadlines your website

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