Government Departments Work To Extend Mortgage Terms And Reduce Interest Rates As Foreclosure Deadline Nears
As the expiration of the ban for foreclosure for federally backed mortgages come closer, The Department of Housing and Urban Development (HUD), Department of Agriculture (USDA), and Department of Veterans Affairs (VA) have decided to give homeowners options to reduce their monthly principal and interest by lengthening the term of the mortgage.
For borrowers who can resume paying their mortgage, federal agencies will allow them to move their payments to the end of their mortgage. But the White House said some homeowners will need “deeper assistance” to become current and keep their homes.
“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,” the White House said in a press release.
HUD will offer a partial claim to borrowers who can start making their mortgage payments again.
For borrowers who are unable to make monthly payments after the foreclosure band expires on July 31, 2021, HUD will provide the following assistance:
Mortgage term extension to 360 months at market rates to reduce their payments by 25%
Borrowers could receive an interest-free subordinate
The USDA will also offer new options to help borrowers attain a 20% reduction in their payments. The tools include:
An interest rate reduction
Mortgage recovery advance
These options can be used separately or combined.
For VA borrowers, the VA can purchase up to 30% of borrowers' unpaid principal balance and arrearages, and provide an interest-free subordinate loan similar to a partial claim. Servicers can also extend the loan term to up to 40 years.