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What are Congress’ mortgage stimulus programmes?

Successive stimulus bills have offered relief to homeowners and the American Rescue Plan extends mortgage forbearance and the foreclosure moratorium until the end of June.

What are Congress’ mortgage stimulus programmes?
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Throughout the pandemic the federal government has introduced legislation aimed at easing the financial impact of the covid-19 pandemic. Homeowners who are dependent on a stable household income to cover mortgage payments are particularly vulnerable in a struggling jobs market.

The CARES Act, passed in March 2020, offered the first major assistance to those struggling to cover mortgage payments due to either a loss of income or illness. The stimulus package included a year of mortgage assistance programmes, which was then extended by the Biden administration.

The two major forms of relief are provided through a mortgage forbearance programme and a foreclosure moratorium, both of which aim to prevent mortgage payers from losing their homes due to a temporary change of circumstances. Here’s what the two programmes provide.

Mortgage forbearance will give extra time to struggling households

Government agencies are offering mortgage forbearance for those unable to make their scheduled payments during the pandemic. Forbearance allows the recipients to pause mortgage payments while they are going through a period of financial hardship.

But while you are given a break from the payments it is not wise to use this facility any longer than is strictly necessary; you will have to make up for the missing payments in the future and interest continues to accrue on the amount owed during the pause.

The specific covid mortgage forbearance is available to those who are experiencing financial hardship, either directly or indirectly because of the coronavirus pandemic. It is also available to anyone with a federally-backed mortgage, such as HUD/FHA, VA, USDA, Fannie Mae, and Freddie Mac loans.

The most recent stimulus bill extends the deadline to apply for the forbearance relief to 30 June 2021, for those with a HUD/FHA, USDA, or VA mortgage. There is no deadline for anyone with a Fannie Mae or Freddie Mac mortgage. The forbearance plan typically provides between three and six months’ of relief, but with an option to extend to 12 months if needed. Some claimants may be able to apply for a total of 18 months of forbearance but that will depend on when your first claim was lodged.

Foreclosure moratorium will protect homeowners from eviction

While forbearance gives a bit of extra time for those struggling to make a payment, the moratorium on mortgage foreclosures provides protection from the harshest consequences for missing the payments.

The foreclosure moratorium prevents loan servicers from beginning foreclosure proceedings until 30 June 2021 at the earliest, giving extra time for homeowners to get together the money to make missing payments.

A White House fact sheet published after the extension for mortgage support was announced makes clear how many are struggling to cover scheduled payments. They found that, as of February 2021, over 10 million homeowners are behind on their mortgage with people of colour at greatest risk of eviction and foreclosure.

The White House statement reads: “President Biden is committed to protecting homeownership and housing stability as America begins to turn a painful crisis into a robust recovery.

“Today’s extended forbearance and foreclosure programs are an important step towards building stronger and more equitable communities.”