Homeowners that have loans received with the assistance of the Federal Housing Administration could have some relief in the case that they become unemployed. Loan servicers collecting payments on FHA-backed loans will now be required to allow qualified unemployed borrowers to miss up to 12 months of mortgage payments before beginning foreclosure proceedings.
The FHA's current three to four months of required unemployment forbearance is "inadequate for the majority of unemployed borrowers," Housing Secretary Shaun Donovan said in announcing the change.
"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," Donovan said. "Providing the option for a year of forbearance will give struggling homeowners a substantially greater chance of finding employment before they lose their home."
Although not all borrowers will qualify for the special forbearance program, the Obama administration is removing some hurdles to qualification. Servicers must provide any borrowers who are denied forbearance with the reason for denial. The borrower must be allowed at least seven calendar days to submit additional information that may impact their evaluation.
All FHA-approved servicers must participate in FHA’s loss mitigation program, which includes the special forbearance program. All servicers participating in the Making Home Affordable Program will also be required to extend the minimum forbearance period to 12 months whenever possible under new guidelines.