White House promised more help to avoid foreclosures

The national moratorium on federally backed mortgage foreclosures is set to expire at the end of the week, and the White House has responded by promising more financial aid to struggling homeowners.

Data from Black Knight shows that around 1.5 million U.S. homeowners are still seriously delinquent on their mortgages, which means they have failed to make a payment in the last 90 days. That amounts to around 2.9% of the total mortgage holders in the U.S.

Under normal conditions mortgage providers would have already begun foreclosure proceedings against such delinquent borrowers. However, the federal foreclosure moratorium introduced last year in light of the COVID-19 pandemic prevented such actions.

Now, with that protection about to disappear, the Biden administration has stepped forward with yet more aid to try and help struggling borrowers avoid losing their homes. Earlier this week the White House said borrowers with loans backed by the FHA, FHFA, VA and USDA can choose to extend the length of their mortgages and lock in lower interest rates. Doing so would make it easier for homeowners to stay current on their loans by reducing the amount they need to pay back each month, officials said.

As well as that option, the Department of Housing and Urban Development has said it ill offer lenders the chance to provide eligible borrowers with a 25% principle and interest reduction. Officials said this additional payment reduction would result in fewer foreclosures.

Bob Broeksmit, president and chief executive officer of the Mortgage Bankers Association, praised the latest steps taken by the Biden administration. He said the extra aid is important as it gives people an “opportunity to stay in their homes” following hardship felt during the pandemic.

Additional protection has been introduced by the Consumer Financial Protection Bureau, which announced new rules for lenders earlier this year that bar them from initiating a foreclosure process without first contacting homeowners to determine if they qualify for a lower interest rate or loan modification.