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

Membership | Advocacy

Jul 02, 2025

From Disaster Relief to Challenging Gas Bans, HBAs are Making a Difference

Nearly two dozen HBAs received Association Excellence Awards for outstanding contributions they made on behalf of their members and communities in 2024.

Advocacy

Jul 01, 2025

One Big Beautiful Bill Act Will Spur Economic Growth

NAHB Chairman Buddy Hughes issued the following statement after the Senate passed the One Big Beautiful Bill Act.

View all

Latest Economic News

Economics

Jul 02, 2025

Two or More Story Home Starts Rebound in 2024

Over half of new single-family homes built in 2024 were two or more stories, according the recent release of the Census Bureau’s Survey of Construction (SOC). After declining in 2023, the share of homes started with two or more stories increased again in 2024, continuing the upward trend in place since 2020.

Economics

Jul 01, 2025

May Private Residential Construction Spending Dips

Private residential construction spending fell by 0.5% in May, marking the fifth straight month of decreases. This drop was primarily driven by reduced spending on single-family construction. Compared to a year ago, total spending was down 6.7%, as the housing sector continues to navigate the economic uncertainty stemming from ongoing tariff concerns and elevated mortgage rates.

Economics

Jul 01, 2025

Flat Job Openings for Construction

The count of open, unfilled positions in the construction industry held steady amid a slowdown for housing, per the May Bureau of Labor Statistics Job Openings and Labor Turnover Survey (JOLTS).