By Alan Zibel
Job growthmay be picking up, but the ranks of unemployed remain large, and plenty of Americans are trying to figure out how to pay the mortgage while they’re out of work.
Offering those borrowers a break on their mortgages has long been idea considered by policy makers, but two of the industry’s biggest players — mortgage giants Fannie Mae and Freddie Mac — have only offered limited relief.
Months after a similar move by HUD Secretary Shaun Donovan, unemployed homeowners with loans guaranteed by Fannie and Freddie could now be eligible for reduced or suspended mortgage payments for up to a year. The government-controlled mortgage finance companies emphasized that they were doing so at the direction of their regulator, the Federal Housing Finance Agency.
Starting Feb. 1, Freddie Mac said it will allow companies that collect mortgage payments to give borrowers up to a 12-month break on their mortgages, up from a current level of six months. However, the break, known in the mortgage industry as forbearance, will only be temporary. Borrowers will still owe the payments they have missed.
“These expanded forbearance periods will provide families facing prolonged periods of unemployment with a greater measure of security by giving them more time to find new employment and resolve their delinquencies,” said Tracy Mooney, a Freddie Mac senior vice president. “We believe this will put more families back on track to successful long-term home ownership.”
Freddie Mac didn’t have an estimate available for how many borrowers would qualify.
In the past, mortgage companies could suspend borrowers’ payments for up to three months without Freddie Mac’s written approval, or for six months with prior approval. The company said it did grant longer forbearance terms, but only for events such as natural disasters.
Under the new policy, those mortgage companies will be able to automatically extend the borrower’s forbearance for six months and expand it to a year with Freddie Mac’s approval.
A spokesman for Fannie Mae said the company has “received the same directive from FHFA as Freddie Mac and will be implementing similar changes to our unemployment forbearance guidelines.”