Millions are still at risk of losing their homes as a result of the economic crisis fueled by the pandemic.
More than 10 million U.S. homeowners are behind on their mortgage payments and are experiencing "housing insecurity," according to census data. If you're in that group and your debt is piling up, the White House set aside $10 billion in the recent COVID relief package to help Americans pay their housing costs.
Efforts are underway to get that cash to people who need it most, though experts have warned that the rollout may take some time.
How to qualify for the relief
The $1.9 trillion pandemic rescue bill President Joe Biden signed last month — the law that has been doling out stimulus checks of up to $1,400 — also offers nearly $10 billion of direct financial assistance to help homeowners pay not only their mortgages but also taxes, utilities, insurance and homeowners association dues.
“It’s the first time Congress has included mortgage assistance in pandemic relief," says Bob Broeksmit, president and CEO of the Mortgage Bankers Association. “In the wake of that victory, we are now working with members and state agencies to establish dedicated funds that offer additional solutions as customers exit forbearance."
Homeowners have been able to pause their payments for as long as 18 months through the government’s mortgage forbearance program.
"As that window closes, we want families to have the support and flexibility they need to stay in their homes and succeed long-term," Broeksmit said last week at his trade group's spring conference.
The $10 billion in cash, formally called the Homeowners Assistance Fund, will be distributed to states based on a formula that takes into account numbers of unemployed residents as well as data on late mortgage payments and foreclosures, says the National Council of State Housing Agencies.
You’re eligible for relief if you own your home and have a loan with a principal balance at or below the conforming loan limits set by Fannie Mae and Freddie Mac, the government-sponsored mortgage giants that buy or guarantee most U.S. home loans. The 2021 loan limit in most parts of the U.S. is $548,250.
Getting the money may take time
The money will be funneled to borrowers through state housing agencies.
At least 60% of the state grants must go to homeowners with incomes that don't exceed either the local median income or the national median income, whichever is higher.
Russell Graves, executive director of the National Foundation for Debt Management, a multistate housing counseling agency, says he doesn’t expect the funds to be made available until early 2022.
"There are so many other things going through these agencies: rental assistance, different kinds of pandemic assistance," Graves says. "Frankly, we have never put so much money toward housing in history. The numbers are staggering."
During the wait, forbearance will be key
Graves recommends that homeowners in need call their lenders or servicers — the companies that manage loans and send out statements — to discuss options, including beginning or extending forbearance.
Forbearance allows you to postpone your mortgage payments without getting slammed with late fees or taking a hit to your credit score. (Haven't seen your score in a while? It's easy now to check your credit score for free.)
Those with federally backed loans — some 70% of the U.S. mortgage population — have been able to apply for forbearance in the pandemic. The deferred payments are typically tacked onto the end of the mortgage term. The enrollment window for forbearance was recently extended and now ends June 30.
If you're in the remaining 30%, you don’t have the same flexibility, Graves says. He suggests calling a housing counseling agency approved by the Department of Housing and Urban Development (HUD). Congress has provided $100 million so those agencies can assist homeowners.
Refinancing may be your friend
Another possible remedy for overwhelming housing expenses is to refinance your mortgage, if you haven't already done that.
Mortgage rates recently fell below 3% for the first time in months. The mortgage technology and data provider Black Knight said last week that over 13 million homeowners were still in a good position to refinance — and cut their mortgage payments by an average $283 a month.
The company says the best refi candidates hold 30-year mortgages, have at least 20% equity in their homes, and are current on their payments. They also should have a credit score of 720 or better and be able to shave at least three-quarters of a point (0.75) off their mortgage rate by refinancing.
But you'd need to determine whether you're likely to stay in the home long enough for the savings to more than pay off the new loan's closing costs, which typically run anywhere from 2% to 5% of your loan amount.
If that math doesn’t work, forbearance and Homeowners Assistance Fund money may provide the relief you need.
Hopes for a smooth mortgage aid process
Graves says the closest example to the new mortgage aid program was an Obama-era plan created in response to the Great Recession. The "Hardest Hit Fund" was designed to assist the states hit hardest by the subprime lending crisis.
At that time, federal government also distributed the funds through each state’s housing agency. But there were challenges.
"It was done by the states in fits and starts. There were a lot of states that got a very slow start and tripped over themselves because this was new," Graves says.
He hopes the rollout will be smoother this time: "Since this is similar, there should be some institutional knowledge in each of these state housing finance agencies so they can take their original programs and tweak them to match the current environment."
What if you need help immediately?
If your housing expenses are piling up and squeezing your budget, there are a few ways you can give yourself some financial breathing room right now, long before any aid comes your way.
If you’ve been using credit cards for most of your purchases during the pandemic and are watching the interest charges escalate, you could replace those pricey balances with a single debt consolidation loan at a lower interest rate.
Or try reducing your homeowners insurance premiums by shopping around for a better deal when your policy comes up for renewal. The same comparison shopping approach works well for getting a better price on car insurance.
You also could make a little extra money through a method that's fairly effortless: A popular app helps you earn returns in the record-shattering stock market merely by investing your "spare change."