Mortgage Relief Coming for Unemployed Homeowners

August 30th, 2010

Over the weekend, the Obama Administration announced a new mortgage relief program to assist homeowners who have faced an unexpected reduction in income. If you are unemployed, are underemployed in relation to past income levels, or meet other criteria, you may be eligible for the new program. Many homeowners have been using a free mortgage refinance calculator to see how much money they could be saving on their monthly mortgage payment, but those experiencing a recent loss of income frequently find they do not qualify.

If this is your situation, the new program being advanced by the Obama Administration may assist you.

Making Home Affordable

In February 2009, the Making Home Affordable programs established initiatives to assist homeowners facing foreclosure or delinquency on their mortgages.

Making Home Affordable created several programs for lenders, the Department of Housing and Urban Development (HUD), Fannie Mae and Freddie Mac, and mortgage originators to use to help homeowners lower their mortgage obligations and keep their homes. From refinances to loan modifications, the purpose of Making Home Affordable has been to enable homeowners to keep their homes through difficult economic times. Many homeowners have used a free mortgage calculator to determine their savings through the Making Home Affordable programs.

Secretary Donovan’s Announcement

On Saturday, HUD Secretary Shaun Donovan appeared on CNN’s “State of the Union” and announced what the Administration is calling an “emergency loan program” in response to the very poor housing and economic numbers released last week. Existing home sales dropped 27% from June to July, and new home sales were down 12% during the same time frame–threatening a dramatic further deterioration in home prices. Said Donovan on Saturday, “The July numbers were worse than we expected, worse than the general market expected, and we are concerned. That’s why we are taking additional steps to move forward.”

Donovan explained that the new program would be run through the Federal Housing Administration (FHA) to help unemployed homeowners to stay in their homes. Using funds from the Treasury Department, the Administration is looking to extend the reach of Making Home Affordable to those who have suffered a job loss or other severe income loss.

The program announced Saturday does not provide a simple mortgage refinance. Instead, it is meant to provide a declining balance, deferred payment “bridge loan” (zero percent interest, non-recourse, subordinate loan) for up to $50,000. These funds are used to assist eligible borrowers with payments on their mortgage principal, interest, mortgage insurance, taxes, and/or hazard insurance for up to 24 months.

Criteria for Eligibility

Information regarding the new homeowner assistance program being funded by the Department of the Treasury is now on the MakingHomeAffordable.gov website. It lists the following criteria for eligibility for the new program:

More to Come?

Since the expiration of the homebuyer tax credit in April, home sales have dropped significantly. Housing is a major part of the American economy; although it does not itself inherently create revenue, earnings or income, housing news directly impacts consumer confidence and spending habits. On the CNN program, Donovan was asked if the Administration would look to revive the $8,000 tax credit that seemed to have a strong positive impact on home sales. “All I can tell you is that we are watching very carefully,” Donovan said. “We’re going to be focused like a laser on where the housing market is moving going forward, and we are going to go everywhere we can to make sure this market stabilizes and recovers.”

This comment suggests that housing and mortgage markets are on the front page of the Obama Administration’s playbook as it looks to revive an economy which may have slipped from the momentum that was building through the first quarter. The new program focuses on unemployed homeowners, and should the economy deteriorate further, one might expect more programs from Washington to boost the housing sector.

Regardless of how the housing market, mortgage rates, and government programs change in the coming months, you should use a free mortgage calculator to determine how these changes may impact the housing decisions of you and your family.

Posted By :
Dennis C. Smith is co-owner and broker of record for Stratis Financial in southern California. He has over twenty years' experience in the mortgage industry.

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