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MBA Proposes Forbearance Program to Help Unemployed Homeowners

The Mortgage Bankers Association (MBA) announced on Wednesday that they've proposed a new forbearance program to help qualified homeowners who lose their jobs. The program would allow homeowners to stay in their homes and pay a reduced mortgage payment for up to nine months as they search for a new job.

"The vast majority of new distressed borrowers we are seeing involve the loss of income," said John A. Courson, MBA's President and CEO. "This program is designed to buy those borrowers time to find a new job, after which they could hopefully qualify for a loan modification."

Under the MBA's proposal, loan servicers that participate in the proposed program would delay the foreclosure process and reduce the borrower's monthly mortgage payment based on household income, temporarily giving the borrower more affordable payments so they can keep current on their home loan even while going through a difficult financial situation.

"Recent statistics show that the average unemployed U.S. worker stays unemployed for between six and seven months," added Courson. "That is a long time for a borrower with a dramatic drop in income to stay current on their mortgage. Further, borrowers with such a precipitous drop in income can't qualify for most loan modification programs, so we are looking for ways to allow those borrowers to keep their homes while they look for another job."

Borrowers would be initially evaluated for the forbearance program using a model that assumes they will have found a new job within nine months of first becoming unemployed, with an income equal to 75% of their previous salary.

The borrower would be reevaluated as to employment and income status every three months for a total forbearance of nine months. Once reemployed, the borrower would be evaluated for a modification under the Obama Administration's Home Affordable Modification Program (HAMP).

MBA suggests that some participating servicers would need access to special loans through Treasury to supply funds to servicers so they could continue to advance payments to investors during the extended forbearance period. The program would need to be voluntary and flexible due to financial accounting considerations.

MBA created this program through a special task force of its members, and also consulted with Fannie Mae and Freddie Mac. Representatives of MBA met last week to present the proposal to White House officials, the Treasury Department, and the Department of Housing and Urban Development (HUD).

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Monday, 13 July 2020

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