New Help for Unemployed Homeowners
The Obama administration is working to help out-of-work homeowners stay in their homes. In addition to encouraging Americans keep their homes and manage their monthly bills, the government is attempting to help the housing market (and the economy), through this program, by preventing the price declines associated with foreclosures.
What Does The Program Do?
Beginning August 1st, the Federal Housing Administration (FHA) will be extending the time period that unemployed homeowners can skip mortgage payments before the foreclosure process begins. Right now, the grace period is only three months.
Starting August 1st, this will be extended to 12 months. This means that if you are currently out of work you will be able to go without making a mortgage payment for 12 months before your lender could begin the foreclosure process.
Who Is Eligible?
The one “catch” with this program is that is only applicable to homeowners whose loans are backed by the Federal Housing Administration. Approximately 14% of all mortgages (and 25% of new mortgages) are backed by the FHA.
Homeowners who are participating in the Home Affordable Modification Program would also be eligible for this extended grace period.
What About Other Homeowners?
The Obama administration would like other mortgage lenders, specifically Fannie Mae and Freddie Mac, to participate in this new program. So far, however, they have decided not to join. Note: Fannie Mae and Freddie Mac back 90% of new mortgages in the United States.
Broader Changes to Mortgage Rules
In addition to the changes mentioned, additional housing rules will be taking place starting October 1st. These rules will be adopted by Fannie Mae and Freddie Mac, and therefore applicable to many more Americans. If any of the following conditions occur, you will be able to delay payment for up to one year:
- If your home has been destroyed
- If you or one of your dependents has a long-term illness or disability
- If the borrower has passed away and the property is in probate
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