Unemployed Get Extended Grace Period on Mortgages

Unemployed to get extended grace period on mortgages

The Obama administration will allow some unemployed homeowners to go 12 months without making mortgage payments, up from the current four months. The extended grace period is aimed at keeping more homeowners in their homes so they can avoid foreclosure.

Under the revised guidelines, homeowners with mortgages backed by the Federal Housing Administration (FHA) will have fewer upfront hurdles to qualify for assistance. The government also will require mortgage lenders participating in the Making Home Affordable program to extend the minimum forbearance period to 12 months, up from three months.

Trying to avoid foreclosure

U.S. Housing and Urban Development Secretary Shaun Donovan said in a statement:

The current unemployment forbearance programs have mandatory periods that are inadequate for the majority of unemployed borrowers. 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.

If you are unemployed and believe that you may be eligible for the extended grace period, contact your mortgage servicer. If you don't have an FHA mortgage and don't qualify for help under the program, there may be other alternatives you can consider to get some mortgage relief.

Mortgage calculators

Interest rates are still low so check out a refinance calculator to determine if refinancing your home loan might work. If you have a spouse who is still employed and has good credit, there is a possibility that you might get approved for a refinance. If you get approved for refinancing, be sure to review the amortization schedule so you'll know exactly how much principal and interest will be paid out.

You also may want to consider a short sale, which would allow your home to be sold for less than what is owed on the mortgage loan. Your mortgage lender and any second lien holder would have to agree to such a transaction. A short sale won't happen overnight, but if you are persistent and do everything your mortgage lender asks, this could be a viable way to get some mortgage relief.