Homeowners in mortgage forbearance plans now have more time before their monthly payments start up again, thanks to new moves under the Biden administration.
The Department of Housing and Urban Development, Department of Veterans Affairs, and Department of Agriculture announced on Tuesday that they will provide up to six additional months of deferred payments in three-month increments for mortgages they guarantee. Additionally, homeowners have until the end of June 2021 to enroll in a new forbearance program.
These coordinated actions will cover 70% of existing single-family home mortgages, according to a fact sheet provided by the Biden administration.
The news follows last week's announcement from the Federal Housing Finance Agency that homeowners with mortgages backed by Fannie Mae and Freddie Mac can extend their forbearance programs for another three months, if they entered the plan by the end of February. The government-sponsored entities also extended the moratorium on foreclosure evictions through March; previously, the expiration was Feb. 28.
"Extending the forbearance available on federally-backed mortgages is a critically important move to preserve homeownership for millions of households that have seen income disruption or outright job loss due to the pandemic," said Greg McBride, Bankrate's chief financial analyst. "The year-long forbearance initially afforded through the CARES Act seemed sufficient at the time, but the pandemic and its economic fallout is dragging on far longer than had been expected.”
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About 2.6 million homeowners are currently in forbearance plans, according to estimates this week from the Mortgage Bankers Association. The overall share of mortgages in forbearance is at 5.29%, the lowest level since April 5 of last year.
The actions can also indirectly help struggling renters, too. Landlords who own federally-backed mortgages can take advantage of the forbearance plans and foreclosure moratoriums if their tenants cannot make rent, McBride noted. One in five renters are behind on rent, according to the fact sheet.
Homeowners who are having trouble making their mortgage payments should reach out to their lenders for options.
Typically, a forbearance agreement allows you to stop paying your mortgage for a defined period of time without accruing interest, penalty fees, or the risk of foreclosure. Once you can make payments again, ask your lender about a loan modification so you don't have to pay back all the deferred payments at once.
"It’s important to note forbearance is a short-term measure that should not be seen as a magic solution for any financial hardship," said Ziggy Jonsson, head of financial products for online mortgage lender Better.com. "When you put your mortgage into forbearance, you’re essentially asking your lender to put your mortgage on pause."