The Obama Administration made adjustments to the Federal Housing Administration program that will require servicers to extend the forbearance period for unemployed homeowners to 12 months.
The administration also intends to require servicers participating in the Making Home Affordable Program (MHA) to extend the minimum forbearance period to 12 months wherever possible under regulator and investor guidelines. The adjustments are meant to set a standard for the industry to provide assistance to unemployed borrowers during the downturn said the Department of Housing and Urban Development.
“The current unemployment forbearance programs have mandatory periods that are inadequate for the majority of unemployed borrowers,” HUD Secretary Shaun Donovan said. “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 home.”
In addition to extending the forebearance period and removing the upfront hurdles for borrowers, HUD said servicers are required to 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, the servicer must provide a reason for denial and allow the borrower at least seven days to submit more information that may influence the servicer’s evaluation.
These reforms build on successful Administration initiatives to support unemployed borrowers through the $7.6 billion Hardest Hit Fund and the $1 billion Emergency Homeowner Loan Program (EHLP).