Buzz
With the foreclosure ban ending on July 31, a new White House initiative seeks to prevent a surge of foreclosures by offering a 25% reduction in monthly payments for borrowers facing difficulty in repaying their federally-backed mortgages. Here's the essential information on how you can benefit from this discount—whether or not you're currently in mortgage forbearance.
What is the new policy about?
According to the CARES Act, individuals facing financial difficulty due to COVID-19 are eligible for forbearance—an interest-free break on payments—for up to 360 days (or six months, effective July 1). This applies to borrowers whose loans are supported by the Federal Housing Administration, the U.S. Department of Veterans Affairs, or the U.S. Department of Agriculture.
As the foreclosure moratorium ends on July 30, many homeowners will be transitioning out of forbearance. To assist, the Biden administration offers a 25% reduction in monthly premiums, in exchange for an extended term determined by your lender. As Isaac Boltansky, director of policy research at Compass Point Research & Trading, explains to the Wall Street Journal: “If a reduction in monthly costs helps keep that borrower in their home until they are back on their feet, then it is a win for the borrower, policy makers, and Uncle Sam, as he owns the credit risk.”
Keep in mind that the 25% reduced rate isn’t your only option when leaving forbearance. Other choices include enrolling in a repayment plan, requesting a deferral, or applying for a partial claim on your mortgage (for more information, read this CNET article).
According to a White House fact sheet, homeowners who are still facing issues such as unemployment, retraining, difficulties with overdue taxes or insurance, or other hardships when exiting forbearance may qualify. To apply, simply contact your lender and demonstrate financial hardship.
How to submit your forbearance claim
If you haven't already requested forbearance, there's still time. You can secure a six-month pause on mortgage payments by applying before Sept. 30, when the program ends. To apply, reach out to your lender directly. Additionally, refer to this Consumer Financial Protection Bureau page for helpful tips on what to ask for when making your request.
