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On Friday, the Biden administration plans to expand aid programs for borrowers who fell behind on their mortgages during the Covid-19 pandemic and continue to face economic hardship, to avoid a sharp increase foreclosures in the coming months.
New modification options will be offered to borrowers with Federal Housing Administration loans and other federally guaranteed mortgages, administration officials said. The changes would seek to extend the terms of their mortgages and block lower monthly principal and interest payments to keep more borrowers in their homes.
Right now, homeowners with federally guaranteed mortgages can skip monthly payments for up to 18 months without penalty and catch them later. This relief is expected to start expiring this fall for borrowers who entered into so-called forbearance plans at the start of the pandemic. Meanwhile, a nationwide lockdown ban is due to expire on July 31.
The relief is for borrowers who are preparing to exit forbearance programs but cannot resume their normal mortgage payments because they are earning less now than before the pandemic.
Friday’s expected move would be the Biden administration’s latest to keep distressed borrowers at home and prevent a repeat of the wave of foreclosures that followed the 2008-09 financial crisis. Last month, the Consumer Financial Protection Bureau finalized rules prohibiting mortgage lenders from foreclosing on a property this year without first contacting homeowners to see if they qualify for a lower interest rate or another. loan change that facilitates repayment.
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