by Maurie Backman | Jan. 21, 2021
Homeowners who can't pay their mortgages are getting more of a break.
Millions of Americans have lost their jobs or suffered income loss since the start of the coronavirus pandemic. That includes homeowners as well as renters.
Homeowners, thankfully, have had several relief options available since last spring. One is mortgage forbearance -- specifically, the ability to hit pause on monthly home loan payments for up to 360 days. Another protection that's benefitted struggling homeowners is a ban on foreclosures and evictions for borrowers who were behind on their mortgage payments before the pandemic began. Currently, mortgage lenders can't move forward with foreclosure proceedings or attempt to evict homeowners who haven't been making payments on their mortgages.
Originally, the eviction and foreclosure moratorium was set to expire in June of 2020. But it quickly became clear that the coronavirus outbreak wouldn't be a short-term event. As such, the Federal Housing Finance Agency (FHFA) opted to extend that moratorium several times. Most recently, it extended the date from Dec. 31 to Jan. 31. And now, the agency is once again extending that moratorium until Feb. 28, 2021.
Given the pandemic is still raging and many homeowners remain out of work, the FHFA had to step up and do something to avoid a foreclosure crisis. The goal of extending the moratorium is to keep more borrowers in their homes and help them maintain some stability during these uncertain times.
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Of course, this begs the question: What happens when current protections expire?
There will come a point at which the FHFA can't extend its eviction and foreclosure moratorium any further. Once that happens, delinquent borrowers should, conceivably, be given a chance to get current on their mortgages. But chances are, many won't be in a position to make good on their missed payments or even make ongoing payments. Similarly, borrowers with mortgages in forbearance will need to catch up on missed payments and start making future payments once their 360-day pause comes to an end. But what if, at that point, they still can't pay?
President Joe Biden recently proposed a $1.9 trillion coronavirus relief package that includes boosted and extended unemployment benefits. If passed, Americans will also receive a round of $1,400 stimulus checks to follow the recent $600 payments. Those $600 payments were criticized by many lawmakers as being overwhelmingly stingy given the size of the economic crisis. But for struggling borrowers, $1,400 could fall short in helping them get current or stay current on their home loans.
There's a good chance mortgage lenders will attempt to work with homeowners who've been negatively impacted by the pandemic once these protections expire. But there may come a point when the government needs to intervene to prevent a staggering wave of foreclosures. Biden has made it clear providing aid to those who need it is a priority. Let's hope lawmakers are able to assist borrowers who otherwise risk losing their homes.
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