A federal ban on foreclosures comes to an end July 31, but the White House has announced enhanced assistance for homeowners to potentially help those affected to remain in their homes. This is good news for homeowners who have experienced income loss due to hardships caused by COVID-19.
Homeowners with government-backed mortgages will receive a roughly 25-percent reduction in borrowers’ monthly principal and interest (P&I) payments. This positions homeowners with mortgages backed by the Department of Housing and Urban Development (HUD), Department of Agriculture (USDA), and the Department of Veterans Affairs (VA) in closer alignment with options for homeowners with mortgages backed by Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac have a separate program that allows homeowners with mortgages guaranteed by them to delay payments through forbearance until Sept. 30.
What could this mean for my loan?
Nearly 7.2 million households have taken advantage of forbearance , and some homeowners with government-backed loans have paused mortgage payments up to 18 months. Today, approximately 1.75 million households remain in forbearance.
We know that many of our Wyndham Capital Mortgage homeowners still are facing financial struggles and whether you need to delay or reduce your monthly mortgage payments, help is still available to try and prevent foreclosure. And while we do not offer all the loans identified in this article, it is still a helpful tool to stay in the know with the housing market. Just remember that you need to request assistance from your mortgage servicer. It won’t happen automatically. (Often, the mortgage provider you originally receive your loan through may not currently be servicing your loan, so be sure to double-check your statements for your current mortgage servicer.)
Options for Homeowners with HUD, USDA and VA Loans
Two options for homeowners with HUD loans:
- COVID-19 Recovery Standalone Partial Claim — This is for homeowners who can resume their mortgage payments. HUD will offer borrowers a zero interest, subordinate lien that is repaid when the mortgage insurance or mortgage ends, such as upon sale or refinance.
- COVID-19 Recovery Modification — This is for homeowners who can’t resume making monthly mortgage payments. The recovery modification extends the term of the mortgage to 360 months at market rate and reduces the borrower’s monthly principal and interest payments by 25 percent.
Three options for homeowners with USDA loans:
- Interest Rate Reduction — Borrowers will first be assessed for an interest rate reduction.
- Term Extension — If additional relief is needed, borrowers will be considered for a combination rate reduction and term extension.
- Mortgage Recovery Advance — If the combination of rate reduction and term extension isn’t enough to reach a 20 percent payment reduction, a rate reduction and term extension will be combined with a mortgage recovery advance that will be used to reach the target payment.
The VA offers the COVID-19 Refund Modification to reduce monthly principal and interest payments.
- COVID-19 Refund — This is a junior lien payable to the VA at zero percent interest. In addition, monthly payments can be reduced by modifying the loan and adding up to 120 months to the original maturity date.
Options for Homeowners with Fannie Mae and Freddie Mac Loans
Two homeownership retention tools offered through the Federal Housing Finance Agency:
- Payment Deferral — Borrowers can resume pre-COVID monthly payment after deferring up to 18 months of missed mortgage payments into a non-interest-bearing balloon. (Missed payments don’t have to be repaid until the homeowner sells or refinances.)
- Flex Modification — Borrowers requiring more significant help may receive a loan modification that can lower monthly mortgage payments by 20 percent. (Flex capitalizes all past due amounts, extends the mortgage up to 40 years and in some cases lowers the interest rate and provides for a principal forbearance.)
Financial Assistance is Available for All Homeowners
Federal funds are available to homeowners, even those with mortgages not backed by federal agencies, who need help:
- Homeowner Assistance Fund — There is $9.6 billion in federal funds available to assist with mortgage payments, homeowner’s insurance, utility payments and other specified purposes.
- Extended Term Option —The Government National Mortgage Association (Ginnie Mae) is creating a new security product for modified loans that will provide government agencies flexibility to extend mortgage terms up to 40 years for borrowers behind on mortgage payments. (This extended-term option will be available in late 2021.)
Don’t Wait to Ask for Help
Don’t forget that the foreclosure moratorium ends on July 31. There won’t be an extension. Forbearance enrollment ends Sept. 30. Up-to-date information on relief options, protections, and key deadlines are available at consumerfinance.gov/housing. At Wyndham Capital Mortgage, we want our borrowers to have the resources needed to stay informed. If you have any questions, reach out to your loan officer today.
