As of March 1, 2012, Fannie Mae officially implements a new policy of allowing unemployed homeowners a 6-month forbearance period .
Under the new guidelines, the forbearance lasts 6 months or until 1) the borrower fails to meet their terms; 2) the borrower no longer meets the eligibility requirements; or 3) the servicer receives notification from the borrower that he or she is re-employed or is no longer seeking employment.
After the 6 months expires, homeowners that are still unemployed can request an extension. At this time, the servicer will determine if the borrower is still eligible for the program. This is done on a case-by-case basis. The extension can not cause the delinquency to exceed 12 months of the borrower’s contractual mortgage loan payment, including taxes and insurance.
A mortgage loan is eligible for an Unemployment Forbearance if all the following criteria are met:
- The borrower must have a financial hardship due to unemployment.
- The borrower may be either delinquent or default is reasonably foreseeable.
- The property must be a principal residence. Second homes and investment properties are not eligible.
- The property cannot be vacant, condemned, or abandoned.
- The mortgage loan cannot be an FHA, VA, or Rural Housing mortgage loan.
Upon first review, this program appears to be a great option for borrowers but may ultimately just be a band-aid for a greater issue.
1) A borrower must be evaluated for all foreclosure prevention alternatives including HAMP following the Fannie Mae Workout Hierarchy at the earlier of re-employment or 30 calendar days prior to the expiration of the Unemployment Forbearance plan.Therefore, borrowers must be evaluated for loss mitigation at the conclusion of unemployment or the conclusion of the forbearance plan.
2) The servicer must not accrue or assess late charges to the borrower during the forbearance period. Additionally, all accrued and unpaid late charges must be waived if the borrower receives a permanent Fannie Mae HAMP or Fannie Mae non-HAMP modification.
1) The average unemployment is currently at 45 weeks. The forbearance period under this program is 24 weeks; max of 48 weeks if the homeowner qualifies. However, the forbearance will not be eligible for borrowers who’s contractual payments are more than 12 months in arrears and will not be offered or extended past a contractual arreage due date of 12 months. Therefore, the forbearance period may not cover the full unemployment period for eligible borrowers
2) The arreage is immediately due and payable at the conclusion of the forbearance period. If the borrower regains employment or is ineligible for an Unemployment Forbearance extension, the borrower must cure the delinquency through a full reinstatement, payoff, or a repayment plan
This policy is mandatory in March, but servicers are urged to start this program immediately.
If you have questions regarding your eligibility for this program, please contact The Gantenbein Law Firm.
Keith A. Gantenbein, Jr. is a Colorado foreclosure defense attorney located in Denver and servicing all of Colorado. He also handles bankruptcies, mortgage negotiations, lender liability, real estate, civil litigation, contracts and landlord/tenant. If you think you will be facing foreclosure, or are in the foreclosure process, or have had a wrongful foreclosure, contact Keith Gantenbein at (303) 618-2122 for a one-hour consultation where he will discuss your situation and go over all your options with you.
This article is not intended as legal advice. The opinions of this article are solely the opinion of the author.