Biden Administration Announces New
Protocols for Mortgage Relief
The Biden administration has released its plans to address the continuing difficulties faced by many homeowners in light of the COVID-19 pandemic. These plans include an FHA requirement that mortgage servicers offer a no-cost option to eligible homeowners who can resume their mortgage payments. As to those borrowers who cannot resume their monthly payments, HUD will enhance servicers’ ability to offer reduced payments. This would entail an extension of the remaining term of the mortgage to 360 months, at market rate, thus reducing the monthly mortgage payments. In general, the protocols state that when agencies have the authority to do so, they should accommodate a homeowner’s financial situation by offering new payment reduction options, all designed to help borrowers remain in their home.
These options augment additional COVID protections that HUD published in June. These included the foreclosure moratorium extension, forbearance enrollment extension, and the COVID-19 Advance Loan Modification, a product for eligible borrowers that reduces monthly mortgage payments through a 30-year loan modification. HUD believes that the additional payment reduction will help more borrowers retain their homes, prevent future re-defaults, help more low-income and underserved borrowers build wealth through homeownership, and assist in the broader COVID-19 recovery.
The VA will offer its new COVID-19 Refund option, where the VA purchases the borrower’s COVID-19 arrearages from the servicer, and, if needed, additional amounts of loan principal. These purchased funds will constitute a junior lien, payable to the VA at 0% interest. In addition, servicers can modify the loan by extending the original maturity date by up to 120 additional months. Also, Ginnie Mae has announced its creation of a new product for modifying loans. This product will allow government agencies to extend mortgage terms to up to 40 years, for those borrowers who would benefit from the resulting lower monthly mortgage payment. This product will likely be available for use in late 2021.
Other opportunities for borrowers include the Homeowner Assistance Fund, which provides relief to homeowners by helping with mortgage payments, homeowner’s insurance, utility payments, and other specified purposes.
The government has established a webpage setting forth up-to-date information for homeowners on the various options that are available to them. Further detail is set forth in the White House’s announcement.
