Good News for Unemployed Homeowners

Good News for the unemployed homeowner announced by the Obama Administration. A recent adjustment to Federal Housing Administration (FHA) requirements requires loan servicers to extend the forbearance period for unemployed homeowners to 12 months, increased from 4 months previously. The Administration also intends to require servicers participating in the Making Home Affordable Program (MHA) to extend the minimum forbearance period to 12 months (increased from 3 months) wherever possible under regulator and investor guidelines. These adjustments will provide much needed assistance for unemployed homeowners who are experiencing economic turbulence while seeking employment. These changes are intended to set a standard for the mortgage industry to provide more robust assistance to unemployed homeowners in the economic downturn.
The changes to FHA’s Special Forbearance Program will also require loan servicers to remove upfront hurdles to make it easier for unemployed borrowers to qualify for the forbearance program. During the foreclosure epidemic, many homeowners’ have reported major difficulties in working with banks and other loan servicers while applying for forbearance and or modifications.
This new legislation requires all FHA-approved loan servicers to participate in FHA’s Loss Mitigation Program, which includes the Special Forbearance program.

In addition to extending the forbearance period and removing the up-front hurdles for borrowers, the FHA also reemphasized its requirement that loan servicers conduct a review at the end of the forbearance period to evaluate the borrower for all additional, applicable foreclosure assistance programs and notify the borrower in writing whether or not he/she qualifies for any other available option. If the borrower does not qualify for any foreclosure assistance option, the loan servicer must provide the borrower with the reason for denial and allow the borrower at least seven calendar days to submit additional information that may impact the servicer’s evaluation.

 

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