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Government Extends Mortgage Forbearance for Unemployed

With no sustained pickup in the job market, over six million Americans have been unemployed for longer than 27 weeks. Such extended periods of joblessness remain the predominant force behind the industry's high volume of seriously past-due mortgages.

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With these realities weighing on an already fragile market, the federal government said Thursday that it will extend mortgage relief for unemployed homeowners to a year under the Federal Housing Administration (FHA) and Making Home Affordable (MHA) programs.

For those with an FHA loan, the administration is requiring servicers to extend the forbearance period for unemployed homeowners from four to 12 months. The agency says it will also remove upfront hurdles to make it easier for borrowers who've lost their jobs to qualify for FHA's special forbearance program.

All FHA-approved servicers must participate in the agency's loss mitigation program, which includes the special forbearance program. FHA also reemphasized its requirement that servicers conduct a review at the end of the forbearance period to evaluate the borrower for all applicable foreclosure assistance programs and notify the borrower in writing whether or not they qualify for additional help.

The administration also intends to require servicers participating in MHA to extend the minimum forbearance period offered under the Home Affordable Unemployment Program (UP) from three to 12 months wherever possible

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under regulator and investor guidelines. Additionally, forbearance under UP will become available to borrowers who are seriously delinquent.

""These changes are intended to set a standard for the mortgage industry to provide more robust assistance to unemployed homeowners in the economic downturn,"" Treasury said in a statement.

According to HUD Secretary Shaun Donovan, the four- and three-month mandatory forbearance periods that had been in place under the two federal programs weren’t enough to provide real relief to the majority of unemployed homeowners as they search for new jobs.

“Today, 60 percent of the unemployed have been out of work for more than three months and 45 percent have been out of work for more than six,” Donovan said. “Providing the option for a year of forbearance will give struggling homeowners a substantially greater chance of finding employment before they lose their home.”

The changes announced Thursday build on the administration's initiatives to support unemployed borrowers through the $7.6 billion Hardest Hit Fund and the $1 billion Emergency Homeowner Loan Program (EHLP).

President Obama says throughout the nation’s economic crisis and financial rebuilding of the last few years, housing has been the root of the most “stubborn” problems the administration has had to tackle.

""The continuing decline in the housing market is something that hasn't bottomed out as quickly as we expected, and so that's continued to be a big drag on the economy,"" he said at a Twitter town hall meeting from the White House Wednesday.

""We've had to revamp our housing program several times to try to help people stay in their homes and try to start lifting home values up,” Obama said. “We're going back to the drawing board, talking to banks, try to put some pressure on them to work with people…to make further adjustments, modify loans more quickly, and also see if there may be circumstances where reducing principal may be appropriate.”

About Author: Carrie Bay

Carrie Bay is a freelance writer for DS News and its sister publication MReport. She served as online editor for DSNews.com from 2008 through 2011. Prior to joining DS News and the Five Star organization, she managed public relations, marketing, and media relations initiatives for several B2B companies in the financial services, technology, and telecommunications industries. She also wrote for retail and nonprofit organizations upon graduating from Texas A&M University with degrees in journalism and English.
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