The Administration announced on July 7 that the forbearance period for unemployed homeowners will be extended in two federal programs. Forbearance policies allow homeowners to postpone mortgage payments for a specified amount of time in order to prevent foreclosures.
Servicers who participate in the Federal Housing Administration’s (FHA) Special Forbearance Program will now be required to extend the forbearance period for qualified borrowers from four months to 12 months. The extended forbearance period starts on August 1, and servicers will be given 60 days to implement the new requirements. The program will expire two years after the effective date.
The Administration intends to require servicers who participate in the Making Home Affordable Unemployment Program (UP) to extend the minimum forbearance period of eligible homeowners from three months to 12 months when possible, subject to investor and regulator guidance for each loan. The Department of the Treasury is expected to release a Supplemental Directive soon that will outline program changes.
“Today, 60% of the unemployed have been out of work for more than three months and 45% have been out of work for more than six. Providing the option for a year of forbearance will give struggling homeowners a substantially greater chance of finding employment before they lose their home,” HUD Secretary Shaun Donovan said in a press release.
These changes come shortly after HUD and NeighborWorks America announced the launch of the Emergency Homeowners’ Loan Program (EHLP), a federal program intended to assist homeowners at risk of foreclosure due to unemployment, underemployment, or a medical condition (see Memo, 6/24).
HUD’s press release is available at http://www.usatoday.com/money/economy/housing/2011-07-06-help-for-unemployed-homeowners_n.htm
A HUD factsheet on the program changes is available at http://portal.hud.gov/hudportal/documents/huddoc?id=UnemplymtFactSheet.pdf