More Relief for Homeowners, But Renters' Eviction Deadline Looms
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Here's your Money Briefing for Monday, July 26th. I'm J.R. Whalen for The Wall Street Journal. The economy is stronger now than it was a year ago, but many homeowners are still hurting and don't have the funds to make their monthly mortgage payments. The federal mortgage deferral program passed last year was a lifeline, but for many homeowners, that program is about to expire. And now new rules are coming to help borrowers keep their homes.
The Biden administration has been fairly focused on making sure there isn't a wave of evictions and foreclosures in the fall.
Millions of renters are also struggling to keep their heads above water. Coming up, we'll ask WSJ housing and banking reporter Andrew Ackerman about programs the Biden administration has put on the table to keep people in their homes. That's after the break.
Millions of Americans struggling to pay the bills have avoided foreclosure or eviction thanks to federal relief programs. But after several extensions, those programs are scheduled to end soon. So where does that leave homeowners and renters? Andrew Ackerman covers the intersection of housing and banking for us. He's been following the issue, and he's here with some updates. Andrew, thanks for coming on the show.
You're welcome.
Thanks for having me. So Andrew, since the start of the pandemic, financially strapped homeowners have been able to turn off making mortgage payments, a process known as forbearance, with no penalty. Where does that program stand?
In September and October, people are going to reach the limit of the forbearance that they have been offered. So that just means that if you suffered a hardship during the pandemic in the early days and you called up your servicer and said, hey, I cannot make my payments. They said, no problem. You can skip your payments. They did it in three-month increments, but you could skip your payments and then make them up later. People who did that early in the pandemic are going to reach the limit of those programs soon. You have to enroll in a forbearance program by the end of September. So there is that deadline, but we're not seeing an uptick. We're seeing a sort of steady decline in the number of people who are under a forbearance plan of some kind.
There's 1.5 million borrowers out of 53 million or so people who are seriously delinquent. And the vast majority of those people are in a forbearance plan.
Okay, so what's in the new initiative that's coming from the Biden administration?
What they're offering is a reduction in monthly payments by up to 25% monthly principal and interest payments. And the way they would do that is they would extend the term of the loan. So if you got a mortgage five years ago, if it was a 30-year fixed rate mortgage, which is what most of the mortgages are in this country, it'd effectively be a 35-year mortgage or up to a 35-year mortgage. You just extend the term for 30 years from today. or from whenever these people start doing this. And then you'd lock in, it'd be effectively a refi because you'd lock in the current market rate. They're basically telling servicers they have to offer this to people who are coming out of forbearance and can't make their pre-pandemic payment.
And it's just one of the options that the borrowers have to kind of consider that the servicers have to offer the borrowers. The people who are eligible are going to be people who have federally backed mortgages. Now, what they're doing is in alignment with some of the steps that Fannie and Freddie have already taken.
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