Unemployed homeowners struggling to pay their government-backed mortgages will now have 12 months to catch up on their payments before losing their homes - up from the current four-month requirement - the Obama administration announced today.
Under the new Federal Housing Administration requirements, banks will be required to wait 12 months to foreclose on unemployed Americans who have defaulted on mortgages backed by the FHA.
Housing and Urban Development Secretary Shaun Donovan said the changes to the so-called forbearance period" are necessary to help people cope with long-term unemployment.
"Today, 60 percent of the unemployed have been out of work for more than three months, and 45 percent have been out of work for more than six," Donovan said in a statement. "Providing the option for a year of forbearance will give struggling homeowners a substantially greater chance of finding employment before they lost their time."
The changes will apply to those participating in the Special Forbearance Program as well as those in the Making Home Affordable Program "wherever possible under regulator and investor guidelines," according to the White House.
Missed payments during the forbearance period, plus interest, will be added on to the cost of each home loan. The changes will take effect August 1 and last for two years.