bluecollardollar: on mortgage forbearance

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on mortgage forbearance

Forbearance is a term that many of us no nothing about. If you don't you have never found your ability to pay back a loan challenged by the amount of money available to pay that debt. Forbearance is often used by just-graduated college students who have yet to find work that pays enough to make their tuition loan payments and be able to survive. In essence, they defer the loan until better times.

Forbearance for mortgage holders in a similar situation has been slow to catch hold. In September of 2010, Fannie Mae began a program to give some relief to homeowners who found their income, or lack of it, was less than their mortgage obligation. Rather than foreclosing, the kept the loan and allowed for some time off their payment schedule. In February 2012, Freddie Mac will join the effort.

The first six months of forbearance have been approved unilaterally and the next six months, for a full year of forgiveness can be had by petitioning Freddie Mac directly. According to Tracy Mooney, a Freddie Mac senior vice president: "These expanded forbearance periods will provide families facing prolonged periods of unemployment with a greater measure of security by giving them more time to find new employment and resolve their delinquencies."

These mortgages are assumed to be discounted in the process, something investments firms do automatically when buying distressed mortgages. Fannie and Freddie are simply following the rest of the lenders by getting ahead of delinquency, the first step towards foreclosure.

You do have to make your mortgage payments on time although to qualify and that hardship caveat may reduce the field of eligible borrowers. But the program has merit. Forbearance is not for everyone and you will have to go to the websites of Fannie and Freddie to find out if you qualify. If you don't, loan modification programs are also available. Be sure to involve your loan servicer as soon as possible.

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