Temporary Mortgage Assistance for the Unemployed
With unemployment hovering the 10% mark, the Treasury Department has expanded its Making Home Affordable plan to provide temporary assistance to unemployed homeowners that are having difficulties paying their mortgages. The plan calls for a 3-6 month forbearance of a portion of the homeowner's mortgage payments - during this period mortgage payments will be at most 31% of the total amount of unemployment insurance received by the homeowner. The forbearance period ends once the person regains employment, or after the 3-6 months are over; at this time, if the homeowner still has difficulties making mortgage payments, he/she will have the opportunity to either see if they can qualify for a mortgage modification under the
Home Affordable Modification Program (HAMP), or the Treasury's
Foreclosure Alternative's program.
Servicers participating in the HAMP program are required to participate in the program - it is unclear whether homeowners whose loans are not serviced by a servicer participating in HAMP will have access to this program. Currently, servicers participating in HAMP represent the great majority of mortgage loans in the country.
The program is expected to be in full effect over the next few months, but no later than fall 2010.
Who qualifies for temporary mortgage assistance? - Homeowners who have become unemployed and request assistance within the first 90 days of having stopped making mortgage payments;
- Only owner-occupied homes qualify (i.e. no speculators, or "house flippers") - homes can range from 1 to 4 unit homes;
- Homeowners whose unpaid principal on their homes is less than $729,500;
- Homeowners that can prove that they are receiving unemployment benefits.
What assistance is provided?The lender grants a period of forbearance of 3-6 months during which the homeowner will make mortgage payments that do not exceed 31% of the person's gross income. Assistance ends once the person has found a new job, or the forbearance period has ended.
How does the temporary mortgage assistance for the unemployed works? - Unemployed homeowner requests assistance within 90 days of becoming delinquent on the payment of the mortgage;
- Servicer set the new mortgage payment at 31% or less of the homeowner's gross income (expected to be in large part unemployment benefits) - the balance is forborne until the individual the end of the 3-6 month period;
- The assistance lasts a minimum of 3 months and ends at end of the 6 month, or when the homeowner finds a new job, whichever comes first;
- If the homeowner mortgage payment after he/she has found a new job exceeds 31% of the his/her new gross income, the servicer is required to see if the person is eligible for a HAMP modification:
- homeowner needs to be current on the reduced payments of the loan during the assistance period;
- homeowner needs to meet all other HAMP criteria;
- Unemployment insurance will NOT be counted as a source of income
- If the homeowner does not find a job after the 6 month assistance period, they will be eligible to take advantage of the Foreclosure Alternatives programs available through the Making Home Affordable program.
How does the Treasury support the temporary assistance for the unemployed homeowner program? - This program will be a no cost to the taxpayer.
NOTE: Just to be clear - we are NOT a government sponsored site, and we try to keep the information on the site accurate and up-to-date. Nevertheless, there may be errors, and you should check the information on qualifications and other details for the plans with your mortgage agent. For homeowners the government provides a simple self-assessment test at: http://www.makinghomeaffordable.gov.