Mortgage finance firm Freddie Mac will give unemployed borrowers a break on their mortgage for up to one year.
"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, senior vice president of single-family servicing and REO at Freddie Mac.
"We believe this will put more families back on track to successful long-term homeownership,” Mooney adds.
Freddie said the new deal expands the powers of mortgage servicers. The edict gives servicers the ability to forebear a mortgage for six months without prior approval from Freddie. Freddie Mac can approve an additional six months after that.
Previously, Freddie Mac allowed servicers to grant up to three months of forbearance with no payment, or six months at a reduced payment, without prior approval.
The new options go into effect on Feb. 1.
Longer forbearance times used to be restricted to events such as natural disasters, permanent disability or long-term medical emergencies — and required prior approval.
William Dudley, president of the Federal Reserve Bank of New York, called for principal forgiveness from Fannie Mae and Freddie Mac, something both GSEs say is not worth doing.
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