After roaring for several years under former President Donald Trump, the American economy took a nosedive in 2020, thanks exclusively to the COVID-19 pandemic. With most of the country shut down for far too long, Americans lost jobs and revenue, which prompted the federal and state governments to impose a moratorium on foreclosures.
According to Fox Business, as the foreclosure moratoriums are set to soon expire, President Joe Biden and his administration announced a new program for Americans with government-backed mortgages, aimed at helping ease the burden of paying their mortgage by discounting the payments.
What’s the new plan?
The housing market has been a whirlwind over the past six months or so, with home prices skyrocketing as the U.S. economy rebounded and interest rates remained low. However, for those Americans who lost their livelihoods thanks to the pandemic, millions are still attempting to play catch-up with their mortgages.
Biden’s plan involves extending government-backed mortgages and in turn, providing homeowners with lower monthly payments, hoping to relieve some of the pressure of income loss due to the pandemic’s toll on the economy as a whole.
The program will only benefit Americans with mortgages through the Departments of Housing and Urban Development, Veterans Affairs, and Agriculture. The Biden administration has proposed a 25% discount in both monthly principal and interest payments.
Fannie Mae and Freddie Mac offered similar relief programs to their customers, in a program set to expire in September. The Biden administration’s relief program was launched to offer those with government-backed mortgages similar routes of relief.
Roughly 7.2 million Americans took advantage of a forbearance program offered by the government during the pandemic, which means that while they were able to experience temporary relief, the bills eventually have to be paid.
More government assistance
Included in the Biden administration’s plan to help homeowners who might have either lost their jobs or are now making less money than they did prior to the pandemic, other forms of assistance will be offered.
The first additional program, which is part of the American Rescue Plan, is called the Homeowner’s Assistance Fund. The fund will provide eligible homeowners with monetary assistance that they can use for mortgage payments, insurance, utilities, and other home-related expenses.
The program will be offered in addition to the aforementioned discount on principal and interest payments.
Another program, known as the Extended Term Option, originated by the Government National Mortgage Association (Ginnie Mae), spurs the creation of “a new security product for modified loans that would provide government agencies the flexibility to extend mortgage terms to up to 40 years.”
Only time will tell if Biden’s relief programs will have the desired effect or end up paving a path to yet another housing crisis in the near future. One can only hope and pray that it’s the former, as America would be hard-pressed to make it through yet another 2008-level housing crash.