Homeowners struggling amid the coronavirus pandemic received some welcome news Tuesday, with the Biden administration announcing it will extend forbearance and foreclosure relief programs.
The White House said that the move will benefit the 2.7 million homeowners currently in Covid forbearance and extend the availability of forbearance options for around 11 million other government-backed mortgages nationwide.
“Since the crisis is going on much longer than anyone anticipated, it’s only appropriate to extend remedies that we know are working,” said Sarah Gerecke, an associate professor of planning at New York University. Many of those relief options were scheduled to expire next month.
Have questions about the new protections? Here are some answers.
Does my mortgage qualify for the new protections?
Federally backed mortgages, or about 70% of borrowers, are eligible for the additional forbearances and protections from foreclosure.
Specifically, if you have a home loan through the Federal Housing Administration, the U.S. Department of Agriculture or the U.S. Department of Veterans Affairs, you can enroll in a forbearance until June 30. If you have a mortgage from Fannie Mae or Freddie Mac, you can also delay your payments.
“The easiest way to find out if you are eligible and to seek payment relief if you need it is to reach out to your lender,” said Greg McBride, chief financial analyst at Bankrate.com.
Unsure of who your lender is? The Consumer Financial Protection Bureau has a guide to figuring that out.
How long can I be in forbearance for?
Some people may be in forbearance for as long as 18 months, since the first stimulus package passed in March, the CARES Act, offered homeowners two 180-day relief periods, and now the Biden administration is granting them two additional three-month breaks.
The rules vary, however, depending on what kind of government-backed loan you have.
If your mortgage is from Fannie Mae or Freddie Mac, you can delay your payments for up to 15 months. But you’ll have to enroll with your lender by the end of February, said Alys Cohen, an attorney at the National Consumer Law Center.
If your home loan is through the Federal Housing Administration, the U.S. Department of Agriculture or the U.S. Department of Veterans Affairs, you’re allowed to delay your payments for 18 months, as long as you do so by the end of June.
How do I request the forbearance?
Call your lender as soon as possible.
Again, if you’re unclear about who your mortgage provider is, the Consumer Financial Protection Bureau has a guide to figuring that out.
The U.S. Department of Housing and Urban Development also has a database of housing counsellors (found by ZIP code) who can help you understand your options.
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Will I need to prove that I qualify for the forbearance?
Onerous paperwork requirements prevented many homeowners from getting relief during the 2008 crisis, McBride said.
Fortunately, during the pandemic, you only have to attest that you’ve suffered a financial hardship. No documentation should be needed.
Do I have to do anything if I’m already in forbearance?
Yes. Your forbearance will not automatically renew. And although these breaks are for up to 15 months or 18 months, they sometimes come in six-month or three-month intervals.
If you need more time, you’ll have to call your lender and ask for it.
How will my missed payments be calculated?
Fortunately, if you qualify for the forbearance, you don’t need to make up your payments in a lump sum at the end of the relief period. (Although if you’re one of the 30% of homeowners who don’t have a government-backed or guaranteed mortgage, you could be asked to.)
Instead, you can ask that your payments be tacked on to the end of your loan, McBride said.
For example, if you missed 12 months of payments, a 30-year mortgage would now take you 31 years to pay off.
What if I’m at risk of foreclosure?
If your mortgage is from Fannie Mae or Freddie Mac, you should be safe from foreclosure through the end of March.
If your home loan is through the Federal Housing Administration, the U.S. Department of Agriculture or the U.S. Department of Veterans Affairs, you’re safe until the end of June.
“You will not be foreclosed on during the period of the moratorium unless you have vacated or abandoned your property,” said Sara Singhas, director of loan administration at the Mortgage Bankers Association.
If you don’t have a government-backed mortgage, or if you have housing debt beyond your mortgage, including homeowner association fees or back taxes, you may still be at risk. People who live in manufactured homes are also not typically protected from foreclosure.
If you’re worried about losing your home, contact one of HUD’s housing counselors and reach out to your local legal aid office.
What if I’m worried about resuming payments?
If you expect that your ability to come up with your monthly mortgage payments will remain hampered beyond your forbearance term, you can ask your lender for a payment reduction, Cohen said.
Although a lower monthly payment can mean a longer loan term and more interest, the option allows many people to stay in their homes. (If you pursue this route, you’ll want to find out how your insurance and tax payments will be impacted.)
I’m a renter. Does this offer me any protections?
These new policies don’t extend any direct relief to renters.
However, on his first day on office Biden, extended a ban on evictions for nonpayment through March. A $25 billion rental assistance fund has also been distributed among states. To learn how to apply for the cash, check out this story.
Correction: The Federal Housing Administration issues home loans. An earlier version misstated the agency’s name.
