Biden declares COVID-19 emergency over, but homeowners still have time to file for forbearance, FHA says

Homeowners suffering pandemic-related hardship that need assistance with their mortgage payments still have time to enroll in a COVID-19 forbearance plan, the Federal Housing Administration (FHA) announced last week.

COVID-19 forbearance was initially set to expire when the COVID-19 national emergency was officially declared over. However, President Joe Biden ended the emergency declaration on Monday, weeks ahead of the planned termination date.

The extension, which also applies to reverse mortgages, will expire on May 31, 2023. No extension period may extend beyond Nov 30, 2023.

"As the National Emergency may end earlier than originally expected, FHA is choosing to extend its COVID-19-related forbearance and HECM extension policies beyond the end of the National Emergency," the FHA said. "This gives borrowers with FHA-insured mortgages who need assistance additional time to request forbearance or a HECM extension. It also provides mortgagees with additional time to offer and process these requests."

If you're struggling to make your mortgage payments after the coronavirus pandemic, refinancing your home loan is another option. Check out Credible if you're interested in seeing what's available for mortgage refinancing and how you can lower your monthly payments.

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FHA approves 40-year loan modification 

Last month, the FHA announced a final rule that allows mortgagees to increase the maximum FHA-insured mortgage loan modification term to 480 months from 360 months following a default. That change will go into effect on May 8.

The proposal, as written, is a step forward in providing mortgage servicers the ability to modify distressed homeowners ten extra years to pay off their mortgage, with a lower monthly payment, A&D Mortgage CEO Max Slyusarchuk said.

"HUD wants to basically take a COVID-19-era protocol and make it permanent, so in essence, the trial phase was completed when mortgage servicers were given the ability to forebear mortgage payments to families impacted by the pandemic," Slyusarchuk said. "The proposed rule will not be applicable to new homebuyers, only those who currently have a 30-year mortgage with the FHA and need extra time to pay it off. 

"Forty-year mortgages are currently available from a few select lenders, but those don't carry the federally-backed mortgage insurance offered by the FHA," Slyusarchuk added.

However, Slyusarchuk said that rising costs could still strain homeowners' pocketbooks.

"For households struggling to make ends meet, such an option will keep many out of foreclosure," Slyusarchuk said. "However, reducing the mortgage by extending the time homeowners need to repay the home loan will not help with larger issues facing the economy, such as rising inflation and interest rates, that will continue to drive other household costs higher, such as the grocery bill and the car loan."

Extending loan repayment terms by ten years could impact how much you can save for retirement. Another option to reduce your mortgage payments and help you save money is by refinancing your home loan, especially since interest rates are hovering near historical lows. Visit Credible to find out what options are available and get prequalified without affecting your credit score.

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Homeowner equity dropping, Redfin says  

The pullback in home buying demand, driven by rising mortgage rates, has contributed to a decline in homeowner equity.  

U.S. homes lost roughly $2.3 trillion in value by the end of 2022, according to a recent Redfin report. Yet, pandemic-era gains helped total U.S. home values register a 6.5% year-over-year increase in December. That means homeowners can still reap significant gains from the pandemic-era boom. 

Home values and prices are down and mortgage rates have started to drop from the 20-year high of 7.08% in November.  If you are looking to take advantage of lower mortgage rates by refinancing your mortgage loan, or are ready to shop for the best rate on a loan, consider visiting an online mortgage broker like Credible to compare rates, choose your loan term and get preapproved with multiple lenders at once.

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