Posted on Tuesday, May 18, 2010
The U.S. Treasury has issued a new Supplemental Directive introducing its payment relief program for homeowners who have lost their jobs.
The Home Affordable Unemployment Program (UP), initially announced by the administration in March, becomes effective July 1, 2010, and offers eligible unemployed borrowers a forbearance plan to temporarily reduce or suspend their mortgage payments for a minimum of three months.
To be eligible for UP, a borrower must meet the Home Affordable Modification Program (HAMP) eligibility criteria as well as be without a job and receiving unemployment benefits in the month of the UP forbearance plan effective date, and must request a UP forbearance plan before they miss three monthly mortgage payments. Servicers have discretion to require a borrower to have received unemployment benefits for up to three months before the start of the forbearance plan.
Borrowers who are unemployed and request assistance through HAMP must first be evaluated for an UP forbearance plan. Borrowers currently in a HAMP trial
period plan who become unemployed may receive forbearance under the UP plan if they missed less than three monthly mortgage payments before they entered the trial. These qualifying borrowers will be transferred from a HAMP trial into an UP forbearance plan immediately, without having to wait until they receive three months of unemployment benefits.
Homeowners previously determined to be ineligible for a HAMP modification may request an UP forbearance plan if they meet the eligibility requirements, but borrowers already in a permanent HAMP modification who become unemployed are not eligible for forbearance under the unemployment program.
The UP forbearance plan term must be three months or upon reemployment, whichever is less. Servicers may extend this period according to their investor/regulatory guidelines. The homeowner’s monthly mortgage payment must be reduced to less than or equal to 31 percent of their gross monthly household income and may be suspended in full.
Borrowers in an UP forbearance plan will be evaluated for a HAMP modification at either reemployment or 30 days prior to the UP forbearance period expiring, whichever happens first.
The newly released guidance for unemployed borrowers applies to first lien mortgage loans that are not owned or guaranteed by Fannie Mae or Freddie Mac or insured or guaranteed by a federal agency, such as the Federal Housing Administration (FHA), as explained to DSNews.com by the HAMP Solution Center.
A representative there explained that a program to provide assistance to jobless homeowners may be forthcoming from the GSEs, but UP is not applicable to government-owned loans.-DSNews