The Department of Housing and Urban Development (HUD) has modified the existing policies related to two of its assistance programs to give unemployed homeowners additional time to obtain a job before losing their homes.  The changes impact FHA requirements and the Making Home Affordable (MHA) program.

The changes to the FHA's Special Forbearance Program will require its servicers to increase the minimum forbearance period for qualified homeowners from four months to 12 and servicers participating in the MHA Unemployment Program (UP) to extend the current minimum forbearance period from three months to 12 where it is possible under regulator and investor guidelines. 

Forbearance is a strategy designed to give distressed borrowers extra time to catch up on their payments before the lender forecloses. According to HUD the changes are intended to set a standard for the industry as a whole for dealing with unemployed homeowners.  

U.S. Housing and Urban Development Secretary Shaun Donovan said.  "Today, 60 percent of the unemployed have been out of work for more than three months and 45 percent have been out of work for more than six.  Providing the option for a year of forbearance will give struggling homeowners a substantially greater chance of finding employment before they lose their home."

In addition to extending the Special Forbearance Program forbearance period, HUD restated its requirement that FHA approved servicers conduct a review at the end of the forbearance period to see if further help might be available through additional assistance programs.  If the borrower does not qualify for additional assistance the servicers must provide the borrower a reason and allow the borrower at least seven additional days to submit supportive information.

The Administration has tailored several other programs specifically targeted to assist unemployed homeowners.  The Hardest Hit Fund is providing $7.6 billion to the 18 states and the District of Columbia that have had the double whammy of high unemployment and steep home price declines and the Emergency Homeowner Loan Program is providing $1 billion to the other 32 states to assist homeowners who have had a loss of income through unemployment or underemployment or because of medical reasons with short-term loans to use for mortgage payments.