The Mortgage Bankers Association has unveiled a conceptual forbearance plan for unemployed borrowers unable to take advantage of existing loan modification programs such as the Home Affordable Modification Program (HAMP).
Under the program, dubbed “Bridge to HAMP,” loan servicers would reduce or postpone monthly mortgage payments for qualified borrowers based on their household income for up to nine months while they sought employment.
A qualified borrower is one who is unemployed involuntarily, living in an owner-occupied home, current or delinquent on the mortgage, with verifiable liquid assets, actively looking for work.
The unemployed homeowner would initially enter into a forbearance plan for up to 90 days (one phase), after which they would be reevaluated and possibly renewed for a total of two additional phases, or a maximum of nine months.
“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.”
Courson pointed to recent statistics that claim the average unemployed U.S. worker stays out-of-work for between six and seven months.
The program would rely on funds from the Treasury to supply loan servicers with advance payments during the forbearance period.
A loss sharing mechanism would also be established to encourage stakeholders, with a portion of the lost home value paid to the investor.
The proposal was sent to Treasury Secretary Tim Geithner for his consideration.