The Freddie Macs Unemployment Forbearance Program is a government-sponsored program that provides assistance for families who are experiencing prolonged periods of unemployment. This is an important program because it provides increased security and help for people who may have difficulty paying their mortgage while they are out of work. If you are in need of assistance, please contact your local unemployment office.
Increased security for families facing prolonged periods of unemployment
Historically, the family has been the foundation of a secure household. The lack of formal government support has left some households vulnerable to adversity. Fortunately, a recent randomized controlled trial (RCT) found that employment assistance is not only feasible, it is also likely to improve the odds of success. Using such programs has helped hundreds of households to re-engage in the workforce. However, this is not a panacea, and the benefits of such programs are not uniform across the board. In many cases, the reentry of a single member of the household is accompanied by a significant drop in the income column. It is therefore no surprise that many of these households are in dire need of help. Not to mention the fact that unemployment is a growing cause of social unrest and incarceration. For these reasons, the job market is an inherently volatile one. Nonetheless, the latest statistics from the Bureau of Labor Statistics indicate that the unemployment rate is currently trending downwards, albeit in small increments. Thus, it is incumbent upon the state government to come up with a plan of action.
Unemployment does not only rob families of their bread and butter, it also presents an array of problems for employers and employees alike. As such, the best way to ensure that no one is left out is to adopt a strategy based on fairness and transparency.
Extended forbearance periods
Freddie Mac has announced an expansion of its unemployment forbearance program. The new program will give unemployed homeowners six months of reduced mortgage payments. This will allow families more time to find employment and resolve delinquencies.
According to Freddie Mac, approximately 10% of all mortgage delinquencies are linked to unemployment. Under the new plan, servicers will be able to offer six months of forbearance to struggling borrowers without prior approval.
Borrowers with Freddie Mac loans have access to a number of mortgage relief options, including forbearance, modification, and refinancing. Forbearance is typically the last resort. However, it may be the best option for homeowners who are in financial distress.
Before requesting forbearance, borrowers must meet certain eligibility criteria. They can request an initial forbearance of 180 days, as long as their mortgage has been guaranteed by Freddie Mac. After the first 180 days, they can request an extension of up to six months.
A borrower can also request an extension of forbearance for up to 12 months. When a borrower ends a forbearance, they must make up for any missed payments. In addition, they must continue to meet the eligibility requirements of the forbearance program.
Mortgage companies have been giving inaccurate information to borrowers about their missed payments. Oftentimes, these borrowers are told that they must pay the amounts they have missed in a lump sum at the end of the forbearance period. While this may be the case with some lenders, most will not impose penalties or interest on these missed payments.
During the forbearance period, a borrower can choose to make payments, or they can suspend payments until the period is over. Servicers are required to inform borrowers of their forbearance options and their rights. If a borrower requests an extension of the forbearance period, they must receive prior approval.
Some advocates have welcomed the extension of forbearance periods. They say that more time allows for a borrower to resolve a delinquency and prevent additional foreclosures. It also helps house prices by limiting the amount of new homes on the market.
Income from furloughed or laid off employees ineligible
In a letter issued to lenders, Freddie Mac noted that furloughed or laid off employees cannot provide evidence of employment-related income. They may be able to use unemployment benefits in the calculation of a monthly income stream, but the income must be verified by a signed federal income tax return.
If the borrower is a seasonal employee, the lender may be able to use unemployment benefits in an alternative qualifying path. However, if the borrower has been laid off or furloughed for more than six months, he or she is ineligible for the loan. A secondary employment income of two years is required for this type of qualifying.
In addition, the borrower must be a co-owner of assets used in the calculation of his or her monthly income stream. This may include inheritance, a sale of real estate, or other assets that are not employment-related. Assets that are not employment-related include divorce proceeds, lawsuits, and virtual currency.
Freddie Mac has also issued a set of FAQs to help lenders understand the new COVID-19 rule. The updated guidelines are expected to have an impact on the origination process for COVID-19 loans.
Loan applications are due on June 7 through business banks. Sellers should contact their employer to determine if any changes in the borrower’s employment status affect the ability to qualify. Once a discrepancy is resolved, the borrower can proceed with qualifying. Be sure to keep all documentation up to date and in compliance with the Allowable Age of Credit Documents policy. You can download a loan application here. By doing so, you will be able to start your qualifying process today. Remember, it can be a stressful time to be furloughed or laid off.