Earlier this week, mortgage giant Freddie Mac announced an expansion of its mortgage forbearance program to assist borrowers who are experiencing a financial hardship due to unemployment.
A forbearance is an agreement on the part of the lender or investor to withhold their claim to foreclose on a property - an agreement not to foreclosure for a set period of time.
According to Freddie Mac, their servicers can now offer eligible borrowers a short-term unemployment forbearance period of up to six months plus the possibility of an extended unemployment forbearance period if they remain unemployed for more than six months. (The six-month forbearance period is 'renewable' for a second six-month period, not to exceed a maximum of 12 months.) Under previous guidelines, the maximum period was six months.
In addition, this expanded program is now available for unemployed homeowners that are already performing under a HAMP or other loan modification program. If they continue to be eligible for HAMP or another loan modification program, they will be re-evaluated at the end of the forbearance period.
Freddie Mac has outlined some basic eligibility criteria for borrowers (the full criteria are available in their Single-Family Seller/Servicer Guide (Guide) Sections A65.26 through A65.28, here) that include:
- Borrower must currently be experiencing an an unemployment hardship;
- Borrower's current monthly housing expense-to-income ratio (excluding unemployment benefits) must be greater than 31%;
- Borrower's cash reserves cannot exceed 12 months of their monthly housing expense;
- Only a borrower's primary residence is eligible. Second homes and investment properties are ineligible.
- The property cannot be vacant, condemned, or abandoned.
Effective Date
Freddie Mac has strongly encouraged its servicers to begin offering eligible borrowers the unemployment forbearance relief options as soon as possible, but are required to begin offering unemployment forbearance to eligible borrowers no later than February 1, 2012.
Are you struggling with you mortgage and like to know if an unemployment forbearance - - or other solution - - is right for you? In Minnesota, the non-profit housing counselors in the Homeownership Advisors Network are available to meet with you FOR FREE to help you with your options to avoid foreclosure. To find your closest counselor, visit the Minnesota Homeownership Center's website here.
This is actually good news. Borrowers will less likely to announce bankruptcy or home foreclosure because of the high-risk loans made in the past. And all their financial will be paid to Freddie Mac in due time. It's a win-win solution for all.
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