What is a loan forbearance? If you find you can't meet your repayment schedule and you're not eligible for a deferment, you might be granted a forbearance or deferment of your home loan for a limited period. During forbearance period, your payments are temporarily postponed or reduced. Forbearance periods can also be an extension of the time you have to repay your loan.
A percentage of lenders will only offer a workout program that requires the borrower to immediately pay at least 20% or more of the total delinquencies including foreclosure fees, plus the balance of the delinquency will be added to their regular monthly payments over a period of six to forty-eight months. Forbearance plans do not remove a foreclosure action but simply stop it in place until the loan is current. (Note: FORBEARANCE PROGRAMS OFTEN FAIL IF THE LENDER IS NOT FORCED TO CONSIDER THE ABILITY OF THE BORROWER TO PAY).The Home Affordable Unemployment Program (UP)
Effective July 1, 2010, the Home Affordable Unemployment Program became available to consumers. It is designed to grant eligible borrowers who are unemployed and eligible, to receive a loan forbearance in which the regular monthly payment is reduced or suspended for a period of time, usually three months.
This program is designed for borrowers who are unemployed, and if qualified, will receive a UP forbearance plan before the borrower may be considered for HAMP. Servicers re required to offer an UP forbearance plan to a borrower who meets the following minimum eligibility criteria:
- The mortgage loan is a first loan mortgage loan originated on or before January 1, 2009;
- The current unpaid principal balance on the mortgage loan prior to capitalization is not greater than $729,750 for one unit, $934,200 for two units, $1,129,250 for three units and $1,403,400 for four units;
- The mortgage loan is secured by a one-to-four-unit property, one unit of which is the borrower’s principal residence. Additionally, a loan may be considered for UP if the property was originally non-owner occupied, but the servicer can verify that it is currently the borrower’s principal residence;
- The property securing the mortgage loan is not vacant or condemned;
- The mortgage loan is delinquent or default is reasonably foreseeable;
- The mortgage loan has not been previously modified under HAMP and the borrower has not previously received an UP forbearance;
- Servicer to review minimum monthly mortgage payment ratio;
- The borrower is unemployed at the date of the request;
- The borrower will receive unemployment benefits in the month of the forbearance period effective date.
For more information on the various Making Home Affordable Programs, go to the Official HAMP Website.