Fannie Mae and Freddie Mac Unemployment Forbearance program.

Fannie Mae and Freddie Mac have enhanced their Unemployment Forbearance program for homeowners who have lost their jobs. It is a proactive approach that is offered to the unemployed who are struggling with keeping up with their home loan payments.

The new regulations allow mortgage servicers to provide up to six months of suspended or reduced payments without receiving permission in advance. If the homeowner is aggressively looking for employment, and still can’t find a job after six months, then there situation can be reviewed. If the lender believes that an extension is called for and appropriate, then the forbearance can be extended for an additional six months. So in effect the borrower can be entitled to a total of one year of relief on their housing payments.

Another key benefit is that during this entire time of time that unemployment forbearance is in effect, the homeowner can’t be foreclosed upon. This can hold true even if they continue to struggle and fall behind on payments. So people can retain their home during a challenging period.

Definition of Fannie Mae and Freddie Mac forbearance

The forbearance program in effect means that a mortgage servicing company or lender will either completely suspend and not require any payments on the loan. Or they may decide to lower the amount due for a short term, defined period of time. The approach will vary based on each family’s personal and/or financial situation. For example, if another member of your household is still working or you have another source of income, than that client may be treated differently then someone with no income.

The amount that may be suspended or reduced is still owed to the bank at the end of the deal, and it is not waived. So what is not paid during the forbearance period will still need to be paid back at a later date. Do not think of as forbearance eliminating money due, but more just delaying payments and provided more time.





Conditions that need to be met

Some or all of the following will need to be met by people seeking forbearance.

  • If order to qualify for this program from Fannie Mae and Freddie Mac, the house needs to be the principal residence.
  • The applicant needs to be able to prove the job loss and resulting financial hardship, with documents and other proof.
  • The homeowner needs to also prove that without financial help they will likely be foreclosed upon.
  • The homeowner’s assets will be reviewed and they can only have a defined amount of cash and/or assets to their name.
  • Some conditions may be set around income levels as well. For example, Fannie Mae has a rule in effect in which borrowers' monthly mortgage expenses must exceed 31% of their monthly gross total household income.

If you apply and are found to be qualified, then the reduction or suspension in payments will be effective until it expires after 6 months to a year. The borrower also needs to continue to meet eligibility requirements and abide by the terms of the forbearance agreement.

If the six month timeframe expires, then the mortgage servicer will need to review and evaluate the borrower’s case. If the review is completed satisfactorily and the borrower still meets the conditions of the plan, then an extension of the Unemployment Forbearance Program can occur. This is also usually done only if there is no other solution to a possible foreclosure.

Once the client is ineligible for an Unemployment Forbearance extension, which is more than likely do to them getting a job, then the borrower will need to repay any suspension in payments that they were provided. This can usually be done over time through a repayment plan, full reinstatement, or payoff. If after review, it is determined that the homeowner still can’t catch up, then they will need to review other foreclosure prevention plans.

To sign up, call your bank, lender, or mortgage servicer as soon as you lose your job. You need to ask them whether Freddie Mac or Fannie Mae guarantees your mortgage. That is the first step. If so, then the forbearance plan may be an option for you, if you meet the other conditions.




By Jon McNamara

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