FHA to Allow Jobless Homeowners to Miss Mortgage Payments for 1 Year
Posted on July 11th, 2011
The Federal Housing Administration (FHA) recently announced it will allow some unemployed homeowners to remain in their homes without making mortgage payments for an entire year. Homeowners who are in this predicament and qualify under specific terms will be eligible to miss payments without threat of foreclosure starting on August 1.
Grace Period Only for Qualifying Homeowners
As the FHA works to revamp its troubled foreclosure prevention program, it has agreed to allow unemployed homeowners a grace period for mortgage payments before the foreclosure process begins. Previously, that grace period was three or four months, but starting Aug. 1, that period will extend to 12 months.
Currently, there are only two types of unemployed homeowners who qualify for this grace period:
- Homeowners with FHA-backed loans (these loans are usually provided to low- and middle-income borrowers).
- Homeowners in the government’s foreclosure-prevention program.
There are about 10,000 homeowners in the foreclosure program and 3,500 FHA-backed homeowners per month who would be eligible for the grace period.
Officials expect to use the extended period to slow foreclosures while giving lawmakers enough time to develop an effective loan modification program that will help homeowners remain in their homes permanently.
HUD Hopes Other Lenders Will Adopt Similar Policies
The secretary of Housing and Urban Development (HUD), Shaun Donovan, said on Thursday that administration officials hope private lenders, as well as mortgage giants Fannie Mae and Freddie Mac, will adopt similar policies as the FHA since they represent about 90 percent of all new mortgages.
As noted by officials, more than 1.6 million troubled homeowners received trial modifications over the past two years, but since that time about half of the applicants have dropped out the program entirely due to ineffective procedures or bank mishaps like lost paperwork.
President Barack Obama admitted Wednesday in a town-hall-style meeting on Twitter that the government’s programs to help homeowners have not been sufficient and that the administration would be “going back to the drawing board.”
He blamed the three largest U.S. mortgage lenders–Wells Fargo & Co., Bank of America and JPMorgan Chase & Co.–for the failures of the foreclosure program, saying they hadn’t done enough to help people at risk of losing their homes. By restructuring the program, the administration hopes they can finally create an effective solution that will protect homeowners from foreclosure permanently.
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- Americans’ equity in their homes near a record low
- Foreclosures Drop in 84 Percent of U.S. Metro Areas
Tags: Mortgage Payments, Year
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