USDA loan homeowners now have access to a new mortgage relief program that could reduce their monthly payments by 20%.
The USDA released new COVID-19 Special Relief Measures to borrowers impacted by the pandemic.
The announcement came hours after the Biden administration unveiled a preliminary plan to use a combination of existing and new tools to help homeowners with government-backed mortgages avoid foreclosure.
The USDA COVID-19 Special Relief Measures were made available on July 23, roughly a week before the July 31st sunset of the nationwide foreclosure moratorium.
The USDA COVID-19 Special Relief Measures build upon existing mortgage relief measures and comply with the Consumer Financial Protection Bureau’s 2021 Mortgage Servicing COVID-19 Rule.
To be eligible for COVID-19 Special Relief Measures, borrowers must:
- Have been no more than 120 days past due on March 1, 2020; or have a loan originated on or after that date
- Occupy the property as a primary residence
- Request and receive initial COVID-19 forbearance prior to the September 30, 2021 deadline
Homeowners that meet this criteria will first be evaluated for existing special relief measures, which include payment deferral, term extension, and mortgage recovery advance.
If these options do not provide sufficient mortgage relief, borrowers may then be evaluated for COVID-19 Special Relief Measures. This relief allows a 20% payment reduction using the following tools:
- Interest rate reduction based on current Freddie Mac Weekly Primary Mortgage Market Survey (PMMS)
- Term extension up to 480 months (40 years)
- Mortgage Recovery Advance — a one-time payment from the USDA. This advance brings the loan current and doesn’t have to be repaid until the home is sold or refinanced.
The 20% reduction applies only to principal and interest payments, and does not reduce other housing costs like taxes or mortgage insurance. Regardless, it represents a substantial mortgage payment decrease, which may be enough to prevent avoidable foreclosures once the moratorium ends.
Along with the FHA , the USDA was among the first government mortgage programs to implement additional COVID-19 payment reduction plans called for by the Biden administration.
As the pandemic continues to affect many Americans, this additional relief provides a path to sustainable long-term homeownership for struggling USDA borrowers.
Fairway is not affiliated with any government agencies. These materials are not from the VA, HUD, FHA, USDA, or RD, and were not approved by a government agency.