Fannie Mae and Freddie Mac recently extended their foreclosure forbearance programs to give short-term aid to unemployed homeowners, but housing counselors warn that these borrowers will need to look at longer-term solutions.
In a forbearance program, a lender agrees not to foreclose on a property and gives the borrower several months’ grace from or reduction in monthly mortgage payments. The new temporary mortgage payment is often set to 31 percent of the household income; in some cases lenders agree to accept no payments.
The programs work best for temporary setbacks, like job loss, health problems, or natural disasters. Fannie Mae’s extended unemployment program, first offered in the fall of 2010, limits any nonpayment or other forbearance plans to one year, with the second six months requiring approval by both Fannie Mae and the lender.
There are drawbacks to the forbearances though. The most-significant drawback is a larger total debt from the smaller payments. The unpaid balance continues to increase during this time. ANd, even with the program in place, the lender could still report a mortgage as delinquent, which could adversely affect the borrower’s credit score.
Because some agreements add onerous term and conditions, homeowners should also consult with a housing counselor certified by the Dept. of Housing and Urban Development.
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Jeff
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http://www.SanJoseRealEstateSource.com
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Jeff Spoelstra is a California residential real estate agent and REALTOR with years of experience making buying or selling property as easy and painless as possible. It’s my mission to provide the information you want and the help you need to get the home you’ll love.
Disclaimer: The above information is deemed reliable but is subject to change at any time and is not guaranteed to be accurate nor are there any warantees either express or implied. It is not intended to be construed as financial, legal or tax advice. California DRE license #01470808.
