Mortgage relief and Congress Mortgage Stimulus in 2022
If you’ve had a temporary job loss or reduction in income, it can be hard to keep up with mortgage payments — especially with an above-market mortgage rate that’s keeping your payments artificially high. Luckily, there are mortgage relief options that can help. The right one for you will depend on your current financial situation.
What is a mortgage relief refinance?
When most people think of Government or Congress mortgage relief, they’re thinking of HARP — the Home Affordable Refinance Program.
HARP was a government program rolled out by the Federal Housing Finance Agency in 2009. For nine years, it helped millions of homeowners refinance after being hard-hit by the housing crisis.
The HARP program ended in 2018. And similar programs, including Fannie Mae’s HIRO and Freddie Mac’s Enhanced Relief Refinance, were also discontinued.
The reason? Home values have been rising dramatically.
Property values shot up at a record rate in 2020 and 2021. As a result, homeowners nationwide saw their equity levels increase. And the number of underwater borrowers shrunk to just 3% of the market.
There are still programs available to help homeowners with little or no equity, including 97% LTV refinancing from Fannie and Freddie and Streamline Refinancing from FHA, VA, and USDA. However, fewer and fewer homeowners need these programs.
Today, the focus is on helping homeowners who were impacted by Covid-19 lower their mortgage payments.
Homeowner relief options in 2022 include:
- Refinance to a lower interest rate and payment
- Mortgage forbearance
- Loan modification
- Veteran mortgage relief option
Refinance to a lower interest rate and payment
Refinancing can offer homeowners relief by reducing their monthly payments. Most of the time, a refinance will lower your interest rate and extend your loan term — both of which result in a more affordable monthly mortgage payment
What’s more, not everyone needs great credit or perfect finances to qualify for a refinance.
Thanks to rising home values, even homeowners who made a very small down payment or refinanced recently could be eligible for today’s low-interest rates.
Homeowners might be surprised at the amount of equity they gained as housing prices shot up nationwide. And with rates still near historic lows, many borrowers can easily save hundreds every month.
Those savings could put some cushion back in your budget and help improve your personal finances.
Mortgage forbearance temporarily pauses your monthly mortgage payments while you’re going through financial hardship. The debt isn’t forgiven but this can provide some breathing room while you get back on your feet financially.
Your current forbearance options depend on what type of mortgage loan you have, and whether you have used a forbearance plan previously.
Conventional loans (backed by Fannie Mae or Freddie Mac)
You can request up to two 3-month extensions. If you have not yet requested forbearance, you can still do so. There is currently no deadline for requesting initial loan forbearance on conventional mortgages.
Goverment-backed loans (FHA, VA, or USDA)
If you were in a forbearance plan before June 30, 2021, you can request up to two additional 3-month extensions. If you have not yet requested an initial forbearance, you can still do so. Homeowners with loans backed by FHA, VA, and USDA can request forbearance for as long as the Covid-19 National Emergency is in effect
Once your forbearance period reaches its end date, you’ll have a few options for how to exit forbearance and repay your missed loan payments.
Importantly, your loan servicer cannot ask you to repay everything as a lump sum right after exiting forbearance. It’s more likely you’ll pay the missed amount in installments along with your regular mortgage payments or defer repayment until you sell the home or refinance.
For homeowners who need to exit forbearance but don’t qualify for a refinance. Loan modification is for homeowners who have had a permanent — rather than a temporary — change in their financial circumstances. This involves your loan servicer agreeing to lower your rate or extend your loan term to make the mortgage payments more affordable.
Homeowners with FHA, VA, and USDA loans might even be able to take advantage of Biden’s new mortgage stimulus program that lowers payments by as much as 25% via a loan modification.
However, loan modification is typically seen as a last resort for homeowners who can’t refinance or take advantage of other mortgage relief programs.
The Streamline Refinance is a special mortgage refinance program for people with government-backed loans.
Even if you make your three consecutive payments while in forbearance, you may qualify for FHA Streamline refinancing. The Department of Housing and Urban Development (HUD), which oversees the Federal Housing Administration, is one of the more lenient housing agencies.
You can use this refinance even if your current loan is delinquent. However, the lender must verify that the reason for delinquency has been resolved and you’ll be able to make payments on the new loan.
Veteran mortgage relief options
One benefit of a VA loan is that the Department of Veterans Affairs can help you out if you’re having trouble making mortgage payments.
Veteran mortgage assistance comes in two forms:
- You could use a Streamline Refinance loan (IRRRL) to lower your rate and payment
- You could get help from a VA loan professional to figure out your repayment plan
If you’re underwater on a VA loan and need to refinance, you may be able to use the VA Streamline Refinance (IRRRL) to do so.
Like other Streamline programs, the IRRRL requires no income or employment check, and skips the home appraisal — so your LTV won’t matter.
Do you qualify for a lower interest rate?
Refinancing can offer relief from high mortgage payments. By lowering your mortgage interest rate and extending your loan term, you can typically reduce your monthly payment and take some pressure off your budget.
To qualify for a refinance, you’ll need to meet some basic criteria. But these can be very flexible depending on the loan program.
- Credit score of 620 or higher
- No missed mortgage payments in the last year
- Loan-to-value ratio (LTV) of 97% or less
- Debt-to-income ratio of 65% or less with RefiNow or Refi Possible
- Your current loan is backed by FHA, VA, or USDA
- No missed mortgage payments in the last year
- Debt-to-income ratio requirements are flexible
- Credit score requirements are flexible
- No appraisal required, so there’s no maximum LTV
If you’re not eligible to refinance, don’t worry. You may have other options.
Forbearance is still available to homeowners who need temporary mortgage relief due to a job disruption or other financial hardship. And loan modification may be available to those with longer-term relief needs.
Reach out to your mortgage lender or loan servicer to learn more. Your loan advisor will help you understand the types of relief available and which one is right for you.