WASHINGTON–The Biden Administration has announced additional help for borrowers who are behind on mortgage payments due to COVID-19 as many forbearance programs are set to expire.
The expiration of the forbearance assistance has led to numerous predictions of a sharp increase in foreclosures in the coming months.
A national foreclosure ban is set to expire July 31.
The administration’s program would allow borrowers with loans backed by the Federal Housing Administration and other federal agencies to extend the length of their mortgages, locking in lower monthly principal and interest payments. About 75% of new home loans are backed by the federal government, according to the Urban Institute.
The new assistance is aimed at homeowners who took advantage of forbearance programs that allowed them to skip monthly payments for up to 18 months, but who can’t resume making those normal payments as that relief begins to expire, according to the administration.
More Than 1.5 Million ‘Seriously Delinquent’
Adding new modification options for struggling homeowners is “an important additional step to give people the opportunity to stay in their homes after they had a hardship during the pandemic,” Bob Broeksmit, president and chief executive of the Mortgage Bankers Association, told the Wall Street Journal.
The Journal cited Black Knight data showing approximately 1.55 million homeowners are seriously delinquent—meaning they haven’t made mortgage payments in at least 90 days.
“These borrowers, the bulk of whom have forbearance plans, may be most at risk of foreclosure in the coming months,” the Journal reported. “They represent about 2.9% of the 53 million active mortgages, down from a high of about 4.4% in August and September 2020. Borrowers who entered into forbearance plans early in the pandemic will begin to exit those plans in September and October, when Black Knight forecasts that about a million borrowers will still be seriously delinquent.
The Objective
The newest changes announced by the White House aim to reduce monthly payments by up to about 25%, an administration official said, adding they are designed to align with modification options already offered by Fannie Mae and Freddie Mac.
“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,” Isaac Boltansky, director of policy research at Compass Point Research & Trading, which serves large institutional investors, told the Journal.