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As of Aug. 1, 2010 home mortgage servicers participating in the federal government’s Home Affordable Modification Program are required to implement the Home Affordable Unemployment Program or “UP“. This new program provides eligible unemployed homeowners a temporary period during which their regular monthly mortgage payment is reduced or suspended, which is called “forbearance”.
To qualify for the new federal program, borrowers must request their servicer consider them for UP before three full unpaid mortgage payments are due. They must also be able to document that they are unemployed and will receive unemployment benefits in the month the forbearance period will be effective. Servicers also may require that the borrower has been on unemployment benefits for up to three months before the forbearance period can begin.
Once accepted into UP and upon meeting basic Home Affordable Modification Program requirements, the unemployed borrower is placed into a forbearance plan for a minimum of three months or until the borrower becomes re-employed. At the end of the initial forbearance plan, customers may be able to extend the forbearance plan“ based on circumstances and at their loan servicer’s discretion in three-month increments for up to a total of 12 months.
The nation faces the worst stretch of long-term joblessness since the Great Depression. According to Labor Department statistics as of the end of June, 14.6 million people are unemployed and nearly 46 percent of them have been for more than six months. The unemployment rate is 9.5 percent, and 1.4 million workers have been unemployed for at least 99 weeks.
This “forebearance” process will help ease the pain for the nation’s unemployed – we are not insensitive to the plight of millions, whose work prospects are decidedly NOT looking “up” yet! Â It should help support property values in certain housing markets by forestalling a glut of foreclosures. Â However, it may also extend the short sale/foreclosure process, so potential short sale buyers should be aware of potential delays in closing a distressed home they would like to purchase.