The Bureau of Consumer Financial Protection (Bureau) proposed an amendment to the Real Estate Settlement Procedures Act (RESPA) to assist borrowers affected by the COVID-19 emergency.
Millions of homeowners look forward to a loan modification under this new rule that will modify their 30-year mortgage to a 40 year mortgage and decrease their interest rate to less than less than 3.5%.
Let’s say you have a 30-year mortgage in the amount of $500,000 at 5 % interest with a monthly payment of $2,684.
Due to the COVID-19 pandemic, no payment has been made on your mortgage and you now have $64,416 in mortgage arrears (24x months).
Apply the New Rule: Extend the term 40 years (480 months) and reduce the interest rate (3.5%).
The Result: 40-year mortgage in the amount of $564,416 at 3.5% with a monthly payment of $2,186.
Millions of homeowners just saw drop of $498 per month and they haven’t paid their mortgage in 2 years.
That also means that US housing stock is going to continue to decrease and the cost of purchasing a home is going sky rocket.
SEE: CFPB Website
SEE: Federal Register