October 24, 2013
Earlier this year, the FHA indefinitely extended its special forbearance programs for unemployed borrowers. In a mortgagee letter titled, “Extension of Unemployment Special Forbearance” the agency has created an open-ended policy as described below:
“The policies in Mortgagee Letter 2011-23, (Unemployment Special Forbearance: Temporary Program Changes and Clarifications) relating to special forbearances for unemployed borrowers are hereby extended until amended, superseded, or rescinded.”
The policies mentioned above also include a reference to an earlier Mortgagee Letter. “In ML-2000-05, FHA provided mortgagees with additional guidance concerning the Loss Mitigation Program that all mortgagees must follow, when applicable, to reduce FHA insurance losses in those circumstances, as determined by the mortgagee, where delinquent mortgagors might be able to find an alternative to foreclosure.”
“ML 2002-17 amended ML 2000-05 to allow mortgagees to offer forbearance to unemployed mortgagors with good payment records and stable employment histories, even when mortgagees are not able to determine whether the special forbearance will lead to reinstatement of the loan.”
Basically, in 2011, the FHA changed unemployment forbearance policy to remove “the requirement that the mortgagee verify that the mortgagor has a good payment record and stable employment history” and also to extend the minimum FHA loan forbearance period in cases of unemployment to a full 12 months.
Originally, that policy was considered temporary and had an expiration date of August 2013. But now the FHA has extended that expiration date indefinitely. Unemployed FHA borrowers now have the option of special loan forbearance when discussing foreclosure avoidance options with the lender. According to the FHA, at the end of the special forbearance period, the lender must:
“conduct a review…to evaluate the mortgagor for all applicable loss mitigation programs, and notify the mortgagor in writing whether or not he/she qualifies for a loss mitigation option. If the mortgagor does not qualify for any loss mitigation option, the mortgagee must provide the mortgagor with the reason for denial and allow the mortgagor at least seven calendar days to submit additional information that may impact upon the mortgagee’s evaluation.”
Contact your lender directly for information about how to get special forbearance if you are an FHA borrower and have become unemployed.
Do you have questions about FHA home loans? Ask us in the comments section. You can apply or get pre-qualified for an FHA home loan at www.FHA.com (a private company, not a government agency).
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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