What Do Biden’s Mortgage Protection Extensions Mean for You?

If you’re having a tough time paying your mortgage, the Biden administration is extending certain programs to help you. Previously, these protections — including a temporary stay on foreclosures, and options for forbearance — were set to expire at the end of March 2021. 

But seeing as we’re still not done with the coronavirus crisis yet. Although millions of people have been vaccinated and millions more doses are administered every day, some homeowners are still struggling with their mortgage. 

Depending on the type of mortgage you have and your timing, you might be eligible for help until June 30, 2022. To get that help, you’ll need to know how the programs work. 

Who’s Eligible for Mortgage Assistance? 

Only certain types of mortgages are covered by these programs. To qualify, you’ll need either a federally-backed or a federally-sponsored mortgage, which include these types of mortgage loans:

• VA 
• USDA
• HUD/FHA
• Fannie Mae
• Freddie Mac

If your mortgage is held by a private lender, you’re unfortunately not eligible for assistance through these programs. This is similar to the situation with student loans; only federal student loans qualify for automatic deferment, whereas it’s up to individual private lenders to offer private student loan assistance at their discretion. 

If you have another type of mortgage, it’s worth reaching out to your lender to see what assistance they can offer you if you need help.

How Does the Mortgage Forbearance and Foreclosure Moratorium Extension Work?

The protections put in place by the previous administration were set to expire in March. The Biden administration renewed these programs, and they currently consist of two big types of support:

Foreclosure Moratorium

Normally, if you don’t pay your mortgage and you don’t negotiate a temporary forbearance with your mortgage lender, you’ll have your home foreclosed.

A moratorium on foreclosures for federally-backed mortgages is in effect right now, extended until June 30, 2021, eliminating the risk of foreclosure during this time. 

Foreclosure is a bit of a long process and can take several months. If you’re going through foreclosure now, the proceedings will be stopped until the moratorium deadline. If you’re not yet in foreclosure, but you’re not paying on your home loan and aren’t in forbearance, you won’t have foreclosure proceedings started against you until June 30. 

COVID Forbearance 

If you’re going through just a temporary hardship and your work will pick up again (or if you’re able to get another job), forbearance is a handy option. This gives you a temporary break in payments, hopefully until you can get back on your feet. 

With this COVID forbearance, things work a little differently and it’s important to understand the timelines. There are two types of forbearance you may qualify for:

Initial COVID Forbearance

This offers you a 180-day (i.e., six-month) break from payments. 

For HUD, FHA, VA, or USDA loans, you need to request initial forbearance on or before June 30, 2021, otherwise you won’t be eligible for any other COVID forbearance extensions if you need them later. 

For Fannie Mae and Freddie Mac loans have no deadline to request an initial COVID forbearance. But if you plan on applying for a forbearance extension later, you’ll need to have requested your initial forbearance by at least February 28, 2021. If you wait until June 30, 2021 like with HUD, VA, USDA, and FHA loans, you might be eligible for an initial COVID forbearance period but not an extension.  

Forbearance Extension

If you’re still in rough times after the initial forbearance period ends, you can request up to two three-month forbearance extensions, one at a time. This gives you a total of up to six additional months of forbearance. 

If you were already in forbearance, you’re eligible for a maximum of 18 months of forbearance total. You might bump into this deadline if your mortgage was already in forbearance from earlier in the pandemic.  

How to Request COVID Forbearance

It’s also important to know that forbearance is not automatic. If you’re having a tough time, you need to reach out to your lender to arrange forbearance. Otherwise, if you just stop paying your mortgage, you’ll be recorded as defaulting on your loan. 

And while this won’t cause you to be foreclosed on due to the foreclosure moratorium (until June 30, 2021, at least), it still severely damages your credit score. 

To request forbearance, reach out to your lender and request a “COVID hardship forbearance.” You don’t need to provide any documentation or any proof of hardship. There are also no fees or additional charges, although interest will accrue on your loan to be paid off later. 

Remember, you might qualify for up to a full year of forbearance (six months of initial COVID forbearance, plus a three-month extension in two separate periods). You have until June 30, 2021 to request the initial COVID forbearance for whatever type of covered federal mortgage you have. 

To ask for a forbearance extension, you’ll need to have first applied for that initial forbearance by February 28, 2021 (for Fannie Mae and Freddie Mac loans), or June 30, 2021 (for VA, FHA, USDA, or HUD loans). 

What Happens When Forbearance Ends?

Forbearance is a great way to keep your house and preserve your credit score if you run into a temporary financial hardship with COVID. But it’s not a free pass on payments. You’ll still need to pay back skipped payment from the forbearance window. How that looks when you restart payments can take several forms:

• Lump sum. This is NOT required for any of the federally-backed or federally-guaranteed loans covered by this program. But if you have the financial ability, you can always repay those missed payments in one lump sum if you choose.
• Deferral. You may be able to simply tack on those extra payments to the end of your loan. So, if you took a six-month break, for example, you’d simply pay your mortgage for six additional months before it’s paid off. 
• Repayment plan. If you can afford slightly higher payments when you come back, you may be put on a repayment plan. This allows you to pay slightly more each month so you still pay off your loan by the originally-planned date. 
• Modification. If you took a permanent pay cut when you get back to paying off your loan, your lender may be able to modify your loan so that your payments are lower moving forward. 

It’s up to your lender which of these options you may be offered. But rest assured, you won’t be required to pay back all of those missed payments in one lump sum.

FAQ

Here’s a quick rundown of the common questions people have: