Administration Unveils Plan to Cut Payments on Government-Backed Loans Up to 25%

Disaster Response
Published

The Biden administration has announced new loan modification options for borrowers who have government-backed home loans in order to help home owners who are still struggling to make their mortgage payments due to the COVID-19 pandemic.

Under the plan, those with Federal Housing Administration (FHA)-insured mortgages who have been financially impacted by the COVID-19 crisis will be eligible to receive up to a 25% reduction on their principal and interest (P&I) payments. In return, the life of their mortgage payments will be extended to allow for the lower monthly payments.

The COVID relief measures for borrowers with loans backed by the Department of Agriculture include up to a 20% reduction in monthly P&I payments. New options include an interest rate reduction, term extension and a mortgage recovery advance, which can help cover past due mortgage payments and related costs. Borrowers will first be assessed for an interest rate reduction and if additional relief is still needed, the borrowers will be considered for a combination rate reduction and term extension.

The Department of Veteran Affairs’ new COVID-19 Refund Modification provides multiple tools to assist certain borrowers in achieving a 20% reduction in the dollar amount for monthly P&I mortgage payments. In some cases, even larger reductions are possible.

One such tool is the new COVID-19 Refund option, where the VA can purchase from the servicer a borrower’s COVID-19 arrearages and, if needed, additional amounts of the loan principal (subject to an overall cap corresponding to 30% of the borrower’s unpaid principal balance as of the first day of the borrower’s COVID-19 forbearance).

Similar to VA’s COVID-19 partial claim option, the COVID-19 refund will be established as a junior lien, payable to VA at 0% interest.

Home owners can visit consumerfinance.gov/housing for up-to-date information on their relief options, protections and key deadlines.

Subscribe to NAHBNow

Log in or create account to subscribe to notifications of new posts.

Log in to subscribe

Latest from NAHBNow

Sustainability and Green Building

May 14, 2025

Department of Energy Remodels Annual Student Building Design Showcase

The annual BuildingsNEXT Team Showcase, formerly known as the Solar Decathlon, was held last month in Golden, Colo. This collegiate design competition prepares the next generation of building professionals to design high-performance buildings powered by renewables.

Regulations

May 14, 2025

NAHB Submits Extensive Deregulatory Recommendations to OMB

On May 12, NAHB submitted a comprehensive framework of deregulatory recommendations to the Office of Management and Budget (OMB) that covers several federal agencies that encompass a host of regulations affecting the residential construction industry.

View all

Latest Economic News

Economics

May 14, 2025

Permit Activity Declines in March 2025

Permits continue a downhill trend for the third month in a row. Over the first three months of 2025, the total number of single-family permits issued year-to-date (YTD) nationwide reached 232,221. On a year-over-year (YoY) basis, this is a decline of 3.8% over the March 2024 level of 241311. For multifamily, the total number of permits issued nationwide reached 113,344. This is 3.7% below the March 2024 level of 117,695.

Economics

May 13, 2025

Inflation Eased Again in April

Inflation slowed to a 4-year low in April while shelter inflation remained elevated. Despite the easing, inflation may pick up in the coming months as possible inflationary pressure from enacted tariffs and other policy uncertainties continues to threaten economic growth and complicate the Fed’s path to its 2% target.

Economics

May 13, 2025

Residential Mortgages Experience Weaker Demand in First Quarter

Overall demand for residential mortgages was weaker while lending standards for most types of residential mortgages were essentially unchanged according to the Federal Reserve Board’s April 2025 Senior Loan Officer Opinion Survey (SLOOS).