It's a sad tale you read a dozen times a day. Borrower buys home, borrower loses job, borrower loses home. And in some cases, the bad credit people get from missing mortgage payments actually keeps them from getting new jobs! And of course you can;t refinance to a lower mortgage payment when you're out of work. Now, thanks to updates in the HAMP modification program, unemployed borrowers will be able to get help that doesn't involve a foreclosure notice and a moving van

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Mortgage Forbearance for Unemployed Homeowners Under HAMP

If you are otherwise eligible for HAMP and lose your job, you may qualify for at least three months of mortgage forbearance, and maybe as much as six months. During this time, your mortgage payments will be lowered to no more than 31% of your gross monthly income. At the end of this forbearance period, you provide income and asset information and get evaluated for a HAMP modification. Receiving unemployment compensation is de facto evidence of hardship, so you don;t have to worry about that. The temporary assistance is designed to help you keep your home while you look for a new job.

Eligibility

Mortgage lenders and servicers participating in HAMP have to offer you assistance if you lose your job and:

  1. The mortgage meets HAMP eligibility requirements, including that you occupy the home as your primary residence and the loan balance is below $729,000.
  2. You can document receipt of unemployment insurance (UI) benefits.
  3. You must request help before the loan is 91 or more days delinquent.

When Does the Program Start?

Some lenders' programs are already up and running. HAMP administrators expect all participating lenders to be applying the new guidelines in the next few weeks / months.

What Happens at the End of the Forbearance Period?

If you have found employment by the end of the forbearance period, you are then evaluated for a permanent HAMP loan modification, using your new income. Once you provide income documentation (and you must be current on your forbearance payments), a standard net present value (NPV) test is applied. If you pass the NPV test (meaning the lender makes more money by modifying your mortgage than by foreclosing), you get a permanent loan modification. You have to have gotten a job, though -- unemployment insurance does not qualify you for this kind of modification. If you have not found a new job, you may be considered for a Home Affordable Foreclosure Alternative (HAFA), which includes shorts sale or deed-in-lieu of foreclosure solutions.