Biden signed $ 10 billion in mortgage assistance for homeowners. How do you get the money?
The latest COVID relief plan signed by President Joe Biden is reserving billions of dollars for homeowners struggling to make mortgage payments and other bills related to owning a home.
More than 10 million Americans are currently behind on their mortgages and feel “housing insecurity,” according to census data. If you are in this group and have been accumulate debts, how do you claim part of the money?
It will likely take several months for the funds to reach those who need them, in large part because of the way they are disbursed, experts warn.
How to get relief
Recent $ 1.9 Trillion Pandemic Rescue Program Now Paying stimulus checks up to $ 1,400 includes nearly $ 10 billion in direct financial assistance to help homeowners pay not only their mortgages, but also taxes, utilities, insurance, and homeowner’s association dues.
The money, officially called the Homeowners Assistance Fund, will be distributed to states based on a formula that takes into account unemployed residents as well as late mortgage payments and foreclosures, according to the National Council of Landlord Agencies. state housing.
You are entitled to relief if you own your home and have a loan with a principal balance equal to or less than the compliant loan limits set by Fannie Mae and Freddie Mac, the government-sponsored mortgage giants who buy or guarantee most US home loans. The 2021 loan limit in most parts of the United States is $ 548,250.
The money will be channeled to cash-strapped borrowers through state housing agencies. At least 60% of state grants must go to homeowners whose incomes do not exceed the local median income or the national median income, whichever is greater.
Getting money can take time
Russell Graves, executive director of the National Foundation for Debt Management, a multi-state housing counseling agency, said he didn’t expect the funds to be available until early 2022.
“There are so many other things that go through these agencies: rent assistance, different types of pandemic assistance,” Graves said. “Frankly, we have never invested so much money in housing in history. The numbers are staggering. “
The owners need help. The last US census Household pulse survey shows that 7.4% of adults – about 10.1 million people – are not up to date with their rent or mortgage payments and have “little or no confidence” that they will be able to pay rent or next month’s mortgage on time.
While waiting, patience will be the key
Graves recommends that homeowners in need call their lenders or their departments – the companies that handle loans and send out statements – to discuss options, including starting or extending forbearance.
Forbearance allows you to defer your mortgage payments without getting slammed by late fees or hurting your credit score. (Haven’t seen your score for a while? Today you can easily check your credit score for free.)
Those with federally guaranteed loans – about 70% of America’s mortgage population – have been able to apply for forbearance in the pandemic. Deferred payments are usually added at the end of the mortgage term. The registration window for the abstention was recently extended and now ends June 30.
If you’re in the other 30%, you don’t have the same flexibility, says Graves. He suggests calling a housing counseling agency approved by the Department of Housing and Urban Development (HUD). Congress provided $ 100 million for these agencies to help homeowners.
Refinancing Can Be Your Cure
Another possible remedy for the crushing housing expenses is to refinance your mortgage, if you haven’t already.
Mortgage rates remain historically low, so mortgage technology and data provider Black Knight recently reported that 11.1 million homeowners are still in a good position to refinance – and are cutting their monthly mortgage payments by an average of $ 277.
But you’ll need to determine whether you’re likely to stay in the house long enough for the savings to pay off more than the closing costs of the new loan, which typically range between 2% and 5% of your loan amount.
If the math doesn’t work, forbearance and Homeowner Assistance Fund money can give you the relief you need.
Hopes for a smooth mortgage assistance process
Graves says the closest example of the new mortgage assistance program was an Obama-era plan created in response to the Great Recession. The Hardest Hit Fund was designed to help states hardest hit by the subprime lending crisis.
The federal government also channeled the funds through each state’s housing agency. But there were challenges.
“It was done by states in spurts. There were a lot of states that started very slowly and stumbled on themselves because it was new,” Graves said.
He hopes the rollout will be smoother this time: “As it is similar, there should be institutional knowledge in each of these state housing finance agencies so that they can take their original programs and adapt them to the current environment. “
What if you need help right away?
If your housing expenses are piling up and taking a toll on your budget, there are ways to give yourself financial leeway now, long before any help comes your way.
If you used credit cards for most of your purchases during the pandemic and you see interest charges escalating, you can replace those expensive balances with just one. debt consolidation loan at a lower interest rate.
Take an inventory of your streaming services or whatever monthly subscription you might not be using – and say goodbye. Also, download a free browser extension who will be looking for coupons and better prices every time you shop online.