Gov't Gives Struggling Homeowners a Chance

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NEW YORK (BankingMyWay) - Unemployed Americans have received 13 additional weeks of unemployment benefits, thanks to the tax cut compromise President Obama signed into law Dec. 17. That extends the window for homeowners to get temporary relief on mortgage payments under the little-publicized Home Affordable Unemployment Program.

The program, which took effect in August, is a companion to the Making Home Affordable Program introduced in 2009. While the older HAMP is designed to help homeowners reduce mortgage payments permanently, HAUP allows homeowners to reduce or suspend mortgage payments only temporarily.

The program is designed to be easier for unemployed homeowners to get, and is aimed at people who should be able to make their full mortgage payments once they get back to work. HAUP allows homeowners who are no more than three months behind on their payments or very likely to fall behind to reduce their payments to a maximum of 31% of gross income, a calculation that includes the unemployment benefit. Some homeowners can avoid payments altogether.

To qualify, the homeowner must be on unemployment and must have received at least three months of benefits, meaning that the extension negotiated as part of the tax deal opens the door to homeowners who otherwise would have been barred because they were no longer receiving unemployment payments.

The forbearance lasts for a minimum of three months or until the homeowner gets a job, whichever comes first. Lenders can extend the period but are not required to.

Timing is tricky, because there may be only a brief period before the homeowner is more than three months behind in payments but has also received three months of unemployment benefits, though the lender or loan servicer can waive this final requirement.

To qualify, the applicant must meet a number of additional criteria:

  • The property must be a principal residence of no more than four units.
  • The mortgage must have been issued before the end of 2008, and the loan balance cannot exceed $729,550.
  • The homeowner must not have received a loan modification under the HAMP program, or previously received forbearance under the HAUP program.

Qualifying for the program does not automatically qualify the applicant for the longer-term benefits of the HAMP program, but the homeowner can apply for HAMP as well. The process begins by contacting the lender or loan servicer, which must evaluate applications within 10 days.

One final benefit of the program is that the lender or servicer cannot start foreclosure proceedings while the homeowner is being evaluated for or receiving benefits from HAUP, keeping more Americans in their homes.

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