Mortgage Help for Unemployed Homeowners

By:: Kara Johnson | July 06, 2010

Unemployed homeowners can now get help with their mortgage payments while they look for new work, under the federal Home Affordable Unemployment Program.

Effective July 1, the program allows unemployed homeowners to apply for a forbearance to reduce their monthly mortgage payments for at least three months. The forbearance may be extended in some circumstances if the borrower has not yet found a job at the end of three months.

To qualify, a borrower must be out of work and receiving unemployment compensation payments. The mortgage must be past due or at risk of default, although borrowers must apply before the loan is more than 90 days past due.

The property must be the borrower’s principal residence and with a mortgage balance of no more than $729,750 for a single-family home. Higher limits are allowed for up to a four-unit residence, provided that one unit is the borrower’s primary residence.

To apply, borrowers should contact their mortgage servicer. Their servicer must be participating in the Home Affordable Modification Program (HAMP) and the borrowers must not have previously obtained a HAMP loan modification.

Borrowers approved for a forbearance will have their monthly mortgage payments reduced to no more than 31 percent of their gross monthly income during the forbearance period. Borrowers must inform their mortgage servicer if they find work during the forbearance period. In any event, borrowers will be evaluated at the end of the forbearance period to determine their eligibility for a HAMP modification.

The program applies to primary mortgages only; second mortgages or home equity line of credit are not eligible for a forbearance under the program.

More information is available under the Frequently Asked Questions section of the Making Home Affordable web site.

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