January 17, 2012 (Jeff Alan)
Unemployed borrowers who have their mortgages owned or guaranteed by Fannie Mae may be eligible for up to 12 months of forbearance starting March 1, 2012. The new guidelines double the existing policy’s eligibility period.
The policy change is similar to the recent changes made by mortgage sibling Freddie Mac which takes effect on February 1, 2012.
Like Freddie, under the new guidelines, mortgage servicers can now approve unemployed borrowers for six months of forbearance without prior approval from Fannie Mae and can extend the forbearance period up to an additional six months with prior Fannie Mae approval, giving eligible unemployed borrowers up to one year of forbearance.
Previously, mortgage services were allowed to grant up to three months of forbearance with no payment and without prior approval, or six months at a reduced payment with prior approval.
A borrower is eligible for an Unemployment Forbearance if all the following criteria are met:
– The borrower must have a financial hardship due to unemployment.
– The borrower may be either delinquent or default is reasonably foreseeable.
– The property must be a principal residence. Second homes and investment properties are not eligible.
– The property cannot be vacant, condemned, or abandoned.
– The mortgage loan cannot be an FHA, VA, or Rural Housing mortgage loan.
Additionally, the borrower must meet the following criteria to qualify for an extension:
– The borrower has performed as required on the current forbearance plan, unless the servicer has determined that there are extenuating circumstances.
– The borrower’s cash reserves must not exceed 12 months of the borrower’s monthly housing expense.
– The borrower’s current monthly housing expense to income ratio (excluding unemployment benefits) must be greater than 31%.
Borrowers who are in a Fannie Mae HAMP or non-HAMP trial period plan may be eligible for Unemployment Forbearance if they become unemployed during the trial period. They may also subsequently be eligible for a modification upon successful completion of the Unemployment Forbearance.
Other terms and requirements are available on Fannie Mae’s website.
Tags: Fannie Mae, mortgage relief, forbearance, mortgage services, unemployed borrowers