The Biden administration’s latest tactic to combat pandemic recovery will provide new options to help homeowners struggling to make mortgage payments each month.
The new policies announced by Biden will offer Americans the option of lowering their monthly home payments, only to be repaid at a later date.
According to a White House fact sheet:
In order to ensure a stable and equitable recovery from the disruptions of the COVID-19 pandemic and prepare for homeowners to exit mortgage forbearance, the Biden-Harris Administration is taking action to keep Americans in their homes and support a return to a more stable housing market.
Many homeowners will need deeper assistance due to pandemic-related income loss. For example, due to the economic crisis caused by the pandemic, some homeowners are earning less than they were before the pandemic. Homeowners with government-backed mortgages that have been negatively impacted by the pandemic will now receive enhanced assistance, especially if they are looking for work, re-training, having trouble catching up on back taxes and insurance, or are continuing to experience hardship for another reason.
The Department of Veterans Affairs, Department of Agriculture, and Department of Housing and Urban Development will therefore offer a 25% reduction in a monthly principal and interest payments. The policy will “bring federal agency options closer in alignment with payment reduction and loan modification options” for borrowers with government-backed corporations Fannie Mae and Freddie Mac.
Borrowers will be able to lump payments into a non-interest-bearing “balloon,” which can be paid when the borrower “sells or refinances the property.”
The Biden administration’s announcement comes as the American housing demand witnesses record growth.
Fox Business explains:
As the economy continues to rebound from the pandemic and subsequent lockdown measures, administration officials have closely monitored the housing market, which has seen home prices skyrocket in recent months. At the same time, millions of mortgage borrowers are still not out of the woods from the worst economic downturn in decades, raising fears that the market could simultaneously see a housing boom and a housing crisis.
In order to increase the money supply and thereby stimulate the United States economy, the Federal Reserve is presently buying $40 billion in mortgage-backed securities every month — a move that is supporting high demand for homes — in addition to $80 billion in other asset purchases.