Previously, Freddie Mac allowed mortgage servicers to give homeowners up to three months of forbearance, with no payment and without prior approval, or six months of forbearance at a reduced payment with prior approval. Longer forbearance periods required approval and were generally restricted to events such as natural disasters, permanent disability or long-term medical emergencies, according to the press release.
Now Freddie Mac will offer forbearance for an extended period and without prior approval in most cases.
The unemployment problem is a significant one for the housing market, as Freddie Mac says that 10% of its mortgage delinquencies are directly linked to job loss. The extension will give mortgage holders much more time to find work and catch up on their house payments.
“These expanded forbearance periods will provide families facing prolonged periods of unemployment with a greater measure of security by giving them more time to find new employment and resolve their delinquencies.,” explains Tracy Mooney, senior vice president of single-family servicing at Freddie Mac.
“We believe this will put more families back on track to successful long-term homeownership,” Mooney added.
The news was nicely augmented by the Jan. 6 jobs report from the Bureau of Labor Statistics that showed that the economy added 200,000 jobs in December 2011 and that the jobless rate fell to 8.5% for the month.
Freddie Mac spells out some key particulars in its new extended forbearance policy, which begins on Feb. 1, 2012:
- Mortgage servicers can now approve unemployed borrowers with Freddie Mac-owned or -guaranteed loans for six months of forbearance without prior approval from Freddie Mac.
- Servicers can extend the forbearance period up to an additional six months with prior Freddie Mac approval, giving eligible unemployed borrowers with Freddie Mac-owned or -guaranteed mortgages up to one year of forbearance.
- Delinquent borrowers in an existing short-term forbearance plan can be evaluated for an extended forbearance under the new policy.
On both sides of the equation, the Freddie Mac deal is all about buying time – for financially troubled homeowners and for mortgage lenders who realize a jobless situation isn’t forever. The belief is that homeowners who have more time to find a job stand a better chance of resuming their monthly payments.
That’s the idea, anyway, and for the sake of the unemployed homeowner who could use a break, it couldn’t come at a better time.
For more news and advice on the housing industry, check out MainStreet’s Real Estate topic page!