Borrowers who fell behind on their mortgages during the Covid-19 pandemic and continue to face economic hardship will get help from a Biden administration program announced on Friday, a bid to prevent a sharp rise in foreclosures over the coming months.
The 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.
Friday’s changes are aimed at homeowners who took advantage of so-called 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.
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,” said Bob Broeksmit, president and chief executive of the Mortgage Bankers Association.
About 1.55 million homeowners are seriously delinquent—meaning they haven’t made mortgage payments in at least 90 days, according to the mortgage-data firm Black Knight Inc. These borrowers, the bulk of whom have forbearance plans, may be most at risk of foreclosure in the coming months. They represent about 2.9% of the 53 million active mortgages, down from a high of about 4.4% in August and September 2020.
