Freddie Mac Helps Unemployed Homeowners Buy Time
Government-sponsored mortgage giant Freddie Mac took long-awaited steps to help unemployed homeowners cope with financial hardship just as the U.S. unemployment picture showed its first glimmer of improvement, according to an article in the Huffingtonpost.com.
After another dismal year, the U.S. economy added 200,000 new jobs in December 2011, dropping the unemployment rate .6 percentage points to 8.5 percent, according to the Bureau of Labor Statistics. But BLS.gov reports that roughly 13.1 million Americans are still out of work – nearly 43 percent of them for 26 weeks or more.
Freddie Mac Doubles Allowable Payment Suspensions
Nearly 10 percent of Freddie Mac’s delinquent mortgages are tied to borrower unemployment. To cut red tape and speed help to these financially stressed homeowners, Freddie Mac recently doubled its payment suspension period from three months to six and shifted approval authority to its loan servicers – the mortgage companies that manage the loans day-to-day. Extensions of six to 12 months still require Freddie Mac approval.
However, the fate of the 20 percent of homeowners that owe more than their homes are worth – the “underwater” borrowers – remains unclear. According to experts, banking decisions on loan modification or foreclosure have not yet played out, according to Huffingtonpost.com.
“[Payment suspensions are] a positive development for the large number of people who are unemployed and struggling in the foreclosure process,” said Kevin Stein, associate director of the consumer advocacy group California Reinvestment Coalition. “At the same time, if Freddie really wants to make a difference in the foreclosure crisis, they should offer loan modifications with principal reductions.”
Mortgage Suspensions Offer Respite for the Long-Term Unemployed
A three-month break from mortgage payment obligations is expected to help countless families avoid foreclosure, which, for Freddie Mac loans, typically begins after a three-month payment lapse. With continued job growth, formerly unemployed homeowners may find themselves in a position to resume mortgage payments. Besides adding breathing room, the suspension also puts the mortgage on hold, rather than allowing it to slip into delinquency.
If you are facing bankruptcy due to employment issues, consult an experienced bankruptcy attorney to discuss your situation and determine your best course of action.