Unemployed homeowners will be allowed to suspend or reduce mortgage payments for as long as a year under a new policy announced by mortgage finance firm Freddie Mac on Friday. The new rules take effect on Feb. 1.
Freddie Mac will give mortgage servicers the authority to provide six months of forbearance to unemployed borrowers without prior approval, and the agency can approve an additional six months of forbearance after that. Homeowners are still responsible for paying off their full mortgage plus interest after the forbearance period ends.
According to a Freddie Mac news release, unemployed borrowers can now avoid foreclosure by asking their lender to lower their payments for up to one year. The latest statistics suggest nearly 10 percent of delinquencies on Freddie Mac mortgages were tied to unemployment.
The Federal Housing Finance Agency (FHFA) called for the extension, in the hope it would keep more families in their homes. Freddie Mac previously allowed lenders to grant up to three months of forbearance with no payment, or six months at a reduced payment, without the firm's prior approval.
Longer forbearance times were restricted to events such as natural disasters, permanent disability or long-term medical emergencies, and still required prior approval.
"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," Tracy Mooney, Senior Vice President of Single-Family Servicing and REO at Freddie Mac, wrote in a news release. "We believe this will put more families back on track to successful long-term homeownership."
Delinquent borrowers with Freddie Mac owned- or guaranteed-mortgages who are in an existing short-term forbearance plan can be evaluated for an extension under the new policy.
Borrowers interested in learning more about the forbearance program should contact their mortgage servicer. A list of phone numbers can be found at BankRate.com.
If you are unemployed and need financial help, contact your lender or the Homeowner's HOPE Hotline, 888-995-HOPE.