(Photo: Christian Gooden/Landov)
The Obama administration is lending a helping hand to unemployed homeowners by requiring servicers of Federal Housing Administration–backed loans to allow those homeowners to suspend their mortgage payments for up to 12 months and to remove upfront obstacles that make it difficult for borrowers to qualify. Previously, unemployed borrowers were given only a four-month forbearance. The administration also plans to require servicers participating in the Making Home Affordable Program to extend its forbearance period to 12 months whenever possible.
“The current unemployment forbearance programs have mandatory periods that are inadequate for the majority of unemployed borrowers,” said Housing and Urban Development Secretary Shaun Donovan. “Today, 60 percent of the unemployed have been out of work for more than three months and 45 percent 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 homes.”
In addition, FHA is mandating that all of its mortgage services conduct a review at the end of the forbearance period to determine whether the borrowers are eligible for other foreclosure assistance programs. If a borrower doesn’t qualify for additional foreclosure prevention assistance, the servicer must explain why and allow him or her a minimum of seven calendar days to provide additional information that could impact the outcome.
The forbearance extension goes into effect August 1 and will expire two years later. Servicers will have 60 days to implement the extension.
Rep. Elijah Cummings (D-Maryland) has held several foreclosure prevention events in his Baltimore district that have helped many people keep their homes. He believes that many African-Americans will benefit from the extended forbearance period, but wishes Freddie Mac and Fannie Mae were part of the program because they guarantee approximately 44 percent of all mortgages.
“This is a good first step, but we need to be doing every single thing in our power because African-Americans and Hispanics are losing their homes at a disproportionate rate compared to whites, so we’ve got work to do,” he said.