Mortgage financier Freddie Mac announced late last week that it was expanding its forbearance program for unemployed borrowers.
Beginning on February 1, mortgage loan servicers will be able to offer forbearance to unemployed borrowers for up to six months without prior approval from Freddie Mac.
Additionally, the forbearance period can be extended for an additional six months with prior approval, providing eligible borrowers with up to a year of forbearance on their mortgage payments.
In order to qualify, homeowners must have a Freddie Mac owned or guaranteed mortgage.
Previously, loan servicers were only able to grant up to three months of forbearance to struggling homeowners, or six months of reduced mortgage payments with prior approval.
Roughly 10% of Delinquencies Tied to Unemployment
Freddie Mac estimates that roughly 10 percent of all delinquencies on its loans are tied to unemployment, so this is certainly a worthwhile improvement for those who are temporarily unemployed.
It’s important to note that a forbearance plan simply suspends mortgage payments for a certain period of time as a means to avoid foreclosure, and does not entirely forgive missed payments.
Once you become current again (assuming you get a steady job), those suspended payments must be paid in full.
So this is really only a solution for the few homeowners who lost their jobs recently, and expect to be rehired in the near future.
It’s unclear if loan servicers will offer loan modifications to the affected borrowers, such as mortgage rate cuts, though this would make sense if they truly want to keep at-risk borrowers in their homes long-term.
I’m not sure if Fannie Mae is offering a comparable program, but the pair tends to offer similar options for their borrowers.
If you’re in need of such assistance, also consider speaking with your individual mortgage lender, as a number of them have their own programs to deal with temporary unemployment.