New FHA Loan Forbearance Program

The Obama administration recently announced that loan servicers who are collecting payments on FHA loans will be required to allow qualified borrowers who lose their jobs to miss up to 12 months of mortgage payments before initiating foreclosure proceedings against them. See the press release here.

The new forbearance program allows unemployed borrowers to stay in their homes while seeking new employment.

Currently, the FHA’s policy is four months of required unemployment forbearance. Housing Secretary Shaun Donovan claimed the current time period is “inadequate for the majority of unemployed borrowers.”

Donovan also stated, "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. Providing the option for a year of forbearance will give struggling homeowners a substantially greater chance of finding employment before they lose their home."

Not all borrowers will qualify for the new forbearance program, but the Obama administration said it is removing the “upfront hurdles” for qualification. Servicers are required to provide any borrowers who are denied forbearance with the reason for denial and allow the borrower at least seven days to submit additional information that may impact the evaluation.

All FHA-approved servicers must participate in the new forbearance program.

The administration said it hopes that the changes will "set a standard for the mortgage industry to provide more robust assistance to unemployed homeowners in the economic downturn."

Troy Batson is a licensed broker in the State of Oregon ~ troybatson.com ~ Duke Warner Realty ~ 1033 NW Newport Ave. Bend, OR 97701 ~ (541)382-8262