Mortgage Payment Relief May be Available on Fannie Mae and Freddie Mac Loans. Huge news for people who are temporarily unemployed. Fannie and Freddie will begin implementing "forbearance" programs beginning March 1st and Feb.1st (respectively).
On loans they own or have securitized, Fannie and Freddie are now directing servicers to forbear when a borrower can show a job loss.
Unlike the companies' earlier rules, servicers can grant half a year of reduced or suspended payments without getting permission in advance.
If unemployment continues beyond six months, and if the servicer believes additional forbearance for up to another six months would be appropriate, it can ask Fannie or Freddie for approval to do so.
During any unemployment forbearance period under the rule revision, borrowers will not be subject to foreclosure, even if they had fallen behind on payments before the forbearance began.
Fannie Mae's policy becomes mandatory for all loan servicers March 1. Freddie Mac's policy takes effect Feb. 1.
Though no estimates were available on how many borrowers could be assisted under the new guidelines, the numbers are likely to be substantial at a time when the national unemployment rate is at 8.5%.
Forbearance, it should be noted, does not mean a forgiveness or reduction of the principal balance on the mortgage.
Whatever amounts go uncollected during the forbearance period must eventually be repaid. Typically missed payments are "put at the back of the loan" or repaid in increments over the up coming payments.
Not everybody owning a home with a Fannie or Freddie mortgage will be eligible for the expanded job-loss relief.
The house must be a principal residence, not a second home or investment property.
Fannie's guidance to servicers specifically rules out assistance when the home was financed with an FHA, VA or Rural Housing mortgage.
Most important, there must be a documented "financial hardship"caused by the employment loss, and there must be a reasonable chance that without forbearance the borrowers could sink into default and eventually lose the house.
In cases in which borrowers are being considered for an extension of an existing forbearance plan, borrowers will also have to document that they don't have cash reserves - bank accounts or other liquid assets -that exceed 12 months' worth of their monthly housing expenses
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