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The ""Mortgage Bankers Association"":http://www.mortgagebankers.org (MBA) has put forth a concept for a new forbearance program that would allow borrowers who've lost their jobs to remain in their homes[IMAGE]while they seek new employment. According to the proposed program, loan servicers would reduce the borrower's mortgage payment for up to nine months while the homeowner looks for employment.
""The vast majority of new distressed borrowers we are seeing involve the loss of income,"" said John A. Courson, MBA's president and CEO. ""This program is designed to buy those borrowers time to find a new job, after which they could hopefully qualify for a loan modification.""
""Under MBA's proposal"":http://www.mortgagebankers.org/files/News/InternalResource/71954_BridgetoHAMP.pdf, borrowers would be initially evaluated for the forbearance program using a model that assumes the borrower will be reemployed within nine months and earning 75 percent of their previous salary. The borrower would be reevaluated as to employment and income status every three months for a total forbearance of nine months. Once new employment is secured, the program would serve as a ""bridge"" for the borrower to be considered for a modification under the administration's Home Affordable Modification Program (HAMP).
[COLUMN_BREAK]""Recent statistics show that the average unemployed U.S. worker stays unemployed for between six and seven months,"" Courson said. ""That is a long time for a borrower with a dramatic drop in income to stay current on their mortgage. Further, borrowers with such a precipitous drop in income can't qualify for most loan modification programs.""
MBA suggests that some participating servicers would need access to special loans through Treasury so they could continue to advance payments to investors during the extended forbearance period. The trade group also noted that the program would need to be voluntary and flexible due to financial accounting considerations, in particular whether or not lenders would have to classify the forbearance as a troubled debt restructuring (TDR).
MBA created this program through a special task force of its members, and consulted with Fannie Mae and Freddie Mac on the design. Last week, MBA representatives met with officials from the White House, the Treasury Department, and HUD to present the proposal.
Last Friday, ""President Obama announced a new initiative"":http://dsnews.comarticles/obama-pledges-15b-for-unemployed-and-underwater-homeowners-2010-02-19 to provide $1.5 billion to housing finance agencies in especially hard-hit states for them to develop their own loss mitigation programs, with one particular area of focus being assistance for unemployed homeowners. MBA's proposal though, puts the unemployment issue on the national stage, and although participation by servicers would be voluntary, the program would be coupled with federal HAMP efforts.
Nationwide, MBA said in a ""letter to Treasury Secretary Timothy Geithner"":http://www.mortgagebankers.org/files/News/InternalResource/71954_GeithnerLetter.pdf, ""Over the last year, we have seen the ranks of the unemployed increase by about 5.5 million people, increasing the number of seriously delinquent loans by almost 2 million loans and increasing the rate of new foreclosures from 1.07 percent to 1.42 percent.""
