While most U.S. homeowners have come out of the pandemic unscathed, or even further advanced with economical refinances at cheap mortgage rates, millions more have had to opt out to put their loan repayments on hold. A federal foreclosure ban provided them with additional protection.
Now, these guarantees fall.
Although more than 1.74 million mortgages are still in arrears as of Aug. 10, according to mortgage data and technology provider Black Knight, the moratorium on foreclosures expired on July 31 after several extensions.
Some homeowners may find themselves unable to resume regular payments if lenders refuse to extend their forbearance periods. But if this is the boat you find yourself in, new initiatives from President Joe Biden’s administration could help keep you afloat.
A new help for owners
In June, when Biden extended the moratorium on foreclosures for the last time, he also extended the forbearance deadline for borrowers on government-guaranteed loans to September 30.
Time is running out if you have a mortgage that you can’t pay through the Federal Housing Administration (FHA), the United States Department of Agriculture (USDA), or the Department of Veterans Affairs (VA). TIC Tac.
In recent weeks, the White House has announced additional aid, also for government guaranteed loans.
Here is how it is broken down by type of loan:
To keep borrowing costs manageable, mortgage agents are tasked with offering FHA borrowers who can resume their regular payments the option of moving any payments they’ve missed until the end of their mortgage at no additional cost. .
For those who cannot get back on track, the White House said the Department of Housing and Urban Development “will improve the ability of services to provide all eligible borrowers with a 25% [principal and interest cost] reduction.”
This reduction is not as simple as it seems. Known as COVID-19 Recovery Modification, it involves extending the term of your FHA loan to 360 months “at market rate”. Your monthly payments will certainly be less, but you will earn a lot more over the next 30 years.
HUD also offers what it calls the COVID-19 Autonomous Partial Recovery Claim, where FHA borrowers can access an interest-free lien to fund their mortgage payments. The lien will be repaid when you sell your home or refinance your property.
The options aren’t ideal, but they’re better than defaulting on your mortgage.
USDA’s special COVID-19 relief measure can help borrowers reduce their monthly payments by up to 20%.
The options available to USDA borrowers, who are found in rural and some suburban areas, include:
Borrowers will first have their interest rates reassessed. If a lower rate does not meet the 20% reduction target, a combination of rate reduction / term extension will be considered. If that still doesn’t work, a mortgage collection advance will be added to the equation.
VA mortgage holders can also get a 20% reduction in their monthly mortgage payments.
The VA’s COVID-19 repayment option allows the VA to purchase a borrower’s mortgage payments that are past due – and in some cases up to 30% of the outstanding principal balance. The borrowers must then repay the Department of Veterans Affairs, but at 0% interest.
Payments can be reduced if VA borrowers and their agents agree to extend the loan. VA loans can currently be extended for up to 120 months, potentially making the repayment term of 40 years.
While no new payment reduction program was put in place for borrowers with conventional mortgages associated with Fannie Mae or Freddie Mac, it should be remembered that help was already available if one of the mortgage giants government sponsored owns your loan.
You can defer your payments for up to 18 months without incurring interest penalties. These missed payments do not have to be repaid until you sell or refinance your property.
If you need more help, there are loan modification options that can reduce your monthly mortgage payments by 20%.
And note that $ 10 billion in aid was made available to states in the most recent COVID-19 aid program to help homeowners pay not only their mortgages, but taxes, utilities, etc. home insurance and homeowners association contributions.
Other sources of help with your mortgage
If you’re wondering where your next mortgage payment is going to come from, there are a few things you can do to free up space in your budget.
First, if you’ve made your payments regularly and are still in good standing with your lender, consider refinancing your mortgage. With today’s low mortgage rates, you could save hundreds a month with a refi.
If you have a lot of high-interest debt, like credit card balances, they’re definitely eating into your cash flow. Consider consolidating all of your high interest debt into one low interest debt consolidation loan. You’ll pay less interest and wipe those debts off your books sooner.
You can also improve your financial situation by increasing your income.
There is currently a colossal hiring boom in the United States, so now is not a bad time to look for a better paying job or to take up self-employment that generates money.
Or, you can try your luck in today’s still hot stock market without risking the savings of your life. A very popular app can help you invest in a diversified portfolio using little more than the “coin” of your daily purchases.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.