Servicers who utilize a program for unemployed borrowers on Federal Housing Administration loans have been told to give borrowers much more time before requiring them to resume payments.
Loans qualifying for FHA’s special forbearance program will now require servicers to extend the forbearance period from four months to 12 months, according to an announcement Thursday from the Department of Housing and Urban Development. In addition, other up-front hurdles are being removed.
HUD said that all FHA-approved servicers are required to participate in the agency’s loss-mitigation programs.
The requirement was implemented, according to HUD, because 60 percent of unemployed borrowers have been out of a job for more than three months while the time exceeds six months for 45 percent of the group.
A similar requirement is planned for servicers participating in the Making Home Affordable Program.
“These adjustments will provide much needed assistance for unemployed homeowners trying to stay in their homes while seeking re-employment,” HUD stated. “These changes are intended to set a standard for the mortgage industry to provide more robust assistance to unemployed homeowners in the economic downturn.”
After the forbearance period is up, servicers are required to review the borrower’s ability to qualify for other foreclosure-assistance programs. Borrowers who don’t qualify must be notified in writing why they don’t qualify and be given seven days to provide information that might change the servicer’s evaluation.
