Relief for unemployed homeowners has come in the form of up to 12 months mortgage forbearance to borrowers with Freddie Mac owned or guaranteed loans.
U.S. mortgage finance giant Freddie Mac says it will extend the grace period for unemployed homeowners for up to one year in a bid to reduce defaults that lead to foreclosures.
The government-controlled lender said that the mortgage servicers are authorized to provide six months to unemployed borrowers to allow them to work out a way to keep up with their payments (otherwise known as mortgage forebearance). An additional six months could be granted with prior Freddie Mac approval.
The current forbearance program is limited to three months with nonpayment and without prior approval or six months at a reduced payment with prior approval. Freddie Mac said that delinquent borrowers in that plan can be evaluated for eligibility for the new longer-term plan.
According to Freddie Mac, nearly 10 percent of delinquencies on its mortgages were tied to borrowers not having jobs.
By expanding the program, Freddie Mac is assisting in preserving homeownership for homeowners that are in tough times while preventing homes from going into foreclosure which would have further depressed the real estate market.
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- Mortgage servicers can now approve unemployed borrowers with Freddie Mac owned- or guaranteed-loans for six months of forbearance without prior approval from Freddie Mac.
- Servicers can extend the forbearance period up to an additional six months with prior Freddie Mac approval, giving eligible unemployed borrowers with Freddie Mac owned- or guaranteed-mortgages up to one year of forbearance.
- The expanded forbearance options will take effect on February 1, 2012.
- Delinquent borrowers in an existing short term forbearance plan can be evaluated for an extended forbearance under the new policy.
- Previously Freddie Mac allowed servicers to grant up to three months of forbearance with no payment and without prior approval, or six months at a reduced payment with prior approval. Longer forbearance required prior approval and was generally restricted to events such as natural disasters, permanent disability or long-term medical emergencies.
- According to the latest statistics, nearly 10 percent of delinquencies on Freddie Mac mortgages were tied to unemployment.
Attribute to Tracy Mooney, Senior Vice President, Single-Family Servicing and REO, Freddie Mac:
"These expanded forbearance periods will provide families facing prolonged periods of unemployment with a greater measure of security by giving them more time to find new employment and resolve their delinquencies. We believe this will put more families back on track to successful long-term homeownership."
Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation's residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Over the years, Freddie Mac has made home possible for one in six homebuyers and more than five million renters. For more information, visit www.FreddieMac.com
* Disclaimer - The article is intended to provide general information on the subject. Readers who require specific advice should consult experts in the area of interest.