Loan Forbearance for Unemployed Homeowners from FHA
One important tool that lets us help homeowners avoid foreclosure is loan forbearance. The Federal Housing Administration (FHA) has a special loan forbearance program just for homeowners with qualifying mortgages who have become unemployed. This program, the FHA Special Forbearance Program, extends the loan forbearance period to help those who are out of work.
A special forbearance is only available to the unemployed. This gives the borrower relief from making full mortgage payments while they seek employment. At the end of the forbearance period, the lender must re-evaluate the borrower to determine whether a permanent option is needed.
The partial payment is determined by the borrower’s ability to pay, and s/he must agree to actively look for employment during the forbearance term. The borrower must immediately let the lender know when s/he gets a new job.
If a borrower misses two consecutive payments under the Special Forbearance Program (SFP), then s/he will be eligible for foreclosure. The SFP is considered “failed” in this event. An SFP also fails if the borrower abandons the property or reports to the lender that the program can’t be continued.
The SFP period lasts up to 12 months, and can be initiated if the borrower is unemployed and has 3 missed mortgage payments. The borrower cannot be behind by more than 12 months’ worth of mortgage payments.
A special forbearance must be put in writing, and executed by the borrower and the lender. This written document must mention all previously missed mortgage payments.
You may see old reports about this program that indicate it was set to expire in August 2013. (See the FHA’s 2011 announcement here.) In 2013, however, the FHA issued new rules to make the SFP a permanent option for lenders.
If you or someone you know is recently unemployed and concerned about a mortgage, let us help. Our certified counselors can provide one-on-one counseling and advice, including information about the Special Forbearance Program and other options designed to help homeowners avoid foreclosure. Call us today!