(Updated March 2016)
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, 2010, the program allows unemployed homeowners to apply for a forbearance to reduce or suspend their monthly mortgage payments for at least three months. In some circumstances, the forbearance may be extended to a year or more if the borrower is unable to find work.
Borrowers approved for a forbearance will have their monthly mortgage payments temporarily reduced to 31 percent or less of their gross (pretax) monthly income, including unemployment payments, during the forbearance period.
Who can qualify?
To qualify, a borrower must be out of work and eligible to receiving unemployment compensation. 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.
The mortgage must have been obtained prior to Jan. 1, 2009. Mortgages backed by Fannie Mae or, Freddie Mac are not currently eligible for the program; however, Fannie Mae and Freddie Mac have their own forbearance programs borrowers may be eligible for.
To apply, borrowers should contact their mortgage servicer. To be eligible, their servicer must be participating in the Home Affordable Modification Program (HAMP) (more than 100 are). In most cases, the borrower must not have previously obtained a HAMP loan modification, though some servicers will still accept borrowers who had unsuccessful HAMP modifications.
Borrowers accepted into the program must inform their mortgage servicer if they find work during the forbearance period.
May lead to HAMP modification
Regardless of whether they find work or not, borrowers will be evaluated at the end of the forbearance period to determine their eligibility for continued relief through a HAMP loan modification.
The program applies to primary mortgages only; second mortgages or home equity lines of credit are not eligible.
More information is available under the Frequently Asked Questions section of the Making Home Affordable website.