Homeowners With Government-Backed Mortgages May Qualify For Lower Payments, White House Says
Homeowners with mortgages backed by the departments of Housing and Urban Development, Agriculture or Veterans Affairs could get their monthly payments reduced under new guidelines aimed at avoiding foreclosures, the Biden administration said on Friday.
“Many homeowners will need deeper assistance due to pandemic-related income loss,” the White House 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.”
People with mortgages backed by the FHA might be able to qualify for payment reductions of up to 25%, and those with loans backed by the VA and the USDA could get reductions of up to 20%, the statement said. Information about the assistance is available from mortgage servicers – the companies that bill borrowers and receive their monthly payments.
Homeowners who are "looking for work, re-training, having trouble catching up on back taxes and insurance, or are continuing to experience hardship for another reason" are eligible, the White House statement said.
Homeowners who can resume their regular payments when they come out of forbearance but can’t afford to pay the overdue amounts may qualify to have those back payments rolled into a lump-sum, zero-interest subordinate lien that is repaid when they sell the house or refinance the mortgage, the White House statement said. Another option some homeowners may qualify for is to extend the life of the loan to lower monthly payments.
The goal is “to ensure they can afford to remain in their homes and build equity long-term,” the White House statement said. “This brings options for homeowners with mortgages backed by HUD, USDA, and VA closer in alignment with options for homeowners with mortgages backed by Fannie Mae and Freddie Mac.”
Friday’s White House statement expands on announcements made last month by HUD, the VA, and the USDA that they were establishing protocols to make sure no new foreclosures were filed on government-backed mortgages before borrowers are reviewed for options to make their payments more affordable.
Also last month, the Consumer Financial Protection Bureau finalized servicing rules related to the pandemic that requires servicers to meet temporary procedural safeguards before filing foreclosures for most mortgages through the end of the year. The rule also requires that servicers provide information to borrowers about their relief options.