Forbearance programs for unemployed extended

The Federal Housing Administration and the Treasury Department will require mortgage servicers to extend the forbearance period for unemployed homeowners to one full year, Housing Wire reported today.

The Obama administration also said it would remove “upfront hurdles” to the FHA Special Forbearance Program, which previously provided a four-month forbearance, to make it easier for unemployed borrowers to qualify.

Forbearance is an agreement made between a mortgage lender and delinquent borrower in which the lender agrees not to exercise its legal right to foreclose on a mortgage. In return, the borrower agrees to a mortgage plan that will, over a certain time period, bring the borrower current on his or her payments.

The Treasury will require servicers participating in the Home Affordable Modification Program’s unemployment initiative to extend the minimum forbearance period from three months to of 12. Borrowers participating in the HAMP Unemployment Program, or UP, will be able to obtain a forbearance if they are seriously delinquent.

Mortgage servicers are required to review borrower cases after the forbearance period under the FHA program to see if they can qualify for any foreclosure assistance. If the borrower does not qualify, the mortgage 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.