Foreclosure Moratorium Is Ending in 10 Days — Here Are Your Options

Photo of a father and daughter sitting in the kitchen,daughter is comforting her father who is worried about home bills.
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In June, the Biden administration announced the CDC’s decision to extend the foreclosure moratorium until July 31 for federally backed mortgages. The administration also announced this would be the last extension.

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Overall, the number of homes that have entered forbearance or foreclosure has been declining. According to a July 12 survey by the Mortgage Bankers Association, the total number of loans in forbearance dropped by two basis points, continuing a 19-week decline, RisMedia reports.

The figure is a welcome statistic as the moratorium nears its end. The delinquency rate on mortgages for the first quarter of 2021 declined a whopping 35 basis points from the fourth quarter of 2020. However, the rate is still up 202 basis points from the same period the year before the pandemic, RisMedia adds.

Despite the positive trend, a new Harvard housing study shows that about 9% of American homeowners were still behind on their mortgage payments during the first quarter of 2021. If you are one of the millions of Americans who will still need assistance after the moratorium ends, the U.S. Department of Housing and Urban Development has programs that can help.

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New Forbearance

Homeowners who have not previously been in COVID-19 forbearance have until September 30 to request this pause or reduction in mortgage payments. Those who submit a new request for forbearance assistance between July 1 and September 30 are eligible for six months of relief, according to the Federal Housing Administration.

Homeowners who received a forbearance from their mortgage servicer between July 1, 2020 and Sept. 30, 2020, but have not yet recovered financially, can receive a three-month forbearance extension upon request.

COVID-19 Advance Loan Modification

A new program called the COVID-19 Advance Loan Modification will be available to borrowers who are 90 or more days delinquent or are at the end of their COVID-19 forbearance. This 30-year rate-and-term mortgage modification will bring the homeowner’s mortgage loan to “current” status and reduce the principal and interest portion of their monthly mortgage payment by at least 25%. It is a very useful tool with long-term benefits for homeowners.

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Mortgage servicers will have to offer the new ALM to homeowners with FHA-insured mortgages who have faced pandemic-related financial hardship. In order to accept the modification, homeowners will only need to sign the mortgage modification documents and return them to their mortgage servicer.

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Home Equity Conversion Mortgage COVID-19 Extension

Seniors with a home-equity conversion mortgage — also known as a reverse mortgage — who have faced financial hardship during the pandemic can request a six-month extension to delay foreclosure-related deadlines, including those calling their loan due and payable, imposed by loan servicers. Servicers must approve extension requests received after July 1 and before September 30, the FHA states. Seniors who received an extension between July 1, 2020 and Sept. 30, 2020 are entitled to an additional three-month extension, if needed, when they make the request to their servicer.

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About the Author

Georgina Tzanetos is a former financial advisor who studied post-industrial capitalist structures at New York University. She has eight years of experience with concentrations in asset management, portfolio management, private client banking, and investment research. Georgina has written for Investopedia and WallStreetMojo. 

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