U.S. Department of Housing and Urban Development Secretary Marcia Fudge recently said that, thanks to Federal Housing Administration programs, approximately 2 million homeowners with FHA mortgages, including 67,000 in New Jersey, avoided foreclosure during the COVID-19 pandemic.
Homeowners were able to stay in their homes from March 2020 through December 2022, ensuring the health and safety of their families. FHA borrowers struggling to make mortgage payments due to the pandemic received either COVID-19 forbearance or a permanent loan modification that allowed them to avoid foreclosure.
“Although the pandemic has ended, the economic effects will remain a challenge for the foreseeable future,” Fudge said. “These impactful and effective foreclosure prevention tools will help struggling borrowers find the right option to help them get back on their feet and keep them in their homes. These tools have been so successful already, which is why FHA worked to enhance them further and include more borrowers.”
During the COVID-19 pandemic, thousands of homeowners lost their jobs or saw their earnings reduced, making it difficult to keep up with their mortgage payments. HUD’s Federal Housing Administration assisted struggling homeowners by providing the following options:
- Forbearance: Owners received a paused or reduced mortgage payment for a period of time.
- Home Retention Support: Owners received an option designed to help them return to sustainable mortgage payments, bring their mortgage payment current and avoid foreclosure. This includes options such as putting arrearages at the end of their mortgage or obtaining a loan modification.
Noting the effectiveness, last week, FHA extended its COVID-19 toolkit at least for the next 18 months to help all eligible borrowers struggling to avoid foreclosure, regardless of the reason for their hardship.
Included in the new enhancements are updates that also increase the limit on the amount of interest-free arrearages that borrowers can pay at the end of their mortgage term to help maximize the number of borrowers able to retain their homes despite higher interest rates. The mandatory effective date of the changes is April 30, but mortgage servicers may begin offering these options to borrowers immediately.