Help For Borrowers Exiting Forbearance

President Biden announced last week new policies for borrowers in forbearance who have a FHA, VA, or USDA loan. There are about 1.75 million borrowers still in forbearance with 25% of them still having made their mortgage payments. For borrowers who can resume paying their mortgage their missed payments will be moved back to the end of their mortgage thus extending their loan term by the number of months they were in forbearance.  For borrowers who can’t make their “normal” or required payment, here is how FHA can help their borrowers. Their loan terms could be re-extended out to 30 years at a new market rate and could see their payments drop by as much as 25%. I can’t imagine that their payments will drop this much though. od at First Alliance Title at [email protected] They may also receive an interest-free second mortgage that doesn’t have to be repaid until the first mortgage is paid off. This is called a partial claim and this is how it works. If the borrower needs their first mortgage amount reduced by $50k to afford their payments, they will now have a $50k second mortgage to repay later.  For VA borrowers the VA can purchase up to 30% of a borrower’s unpaid loan balance and arrearages, and provide an interest free second mortgage similar to a partial claim as I explained above. The VA will also allow servicers to extend their loan term to 40 years to lower the payment. Which is why Ginnie Mae is preparing to issue new securities pools for mortgages with terms up to 40 years.  With this much help for homeowners combined with soaring home prices across the country I expect there will be very few distressed sales here and across the country.