HUD hands help to borrowers in trouble

October 2, 2002

Introduces program designed to keep families out of foreclosure and in homes

Inman News Features

Families with Federal Housing Administration-insured mortgages will have the opportunity to receive immediate assistance to avoid foreclosure under a new forbearance initiative announced today by The Department of Housing an Urban Development.

The initiative permits lenders of FHA-insured mortgages to assist creditworthy borrowers who are behind in making mortgage payments due to temporary unemployment.

Under the terms of the initiative, a lender may enter into a written special forbearance agreement with a borrower whose mortgage is at least three months but not more than 12 months overdue, and whose loan is not in foreclosure at the time the agreement is executed, according to HUD.

To be eligible, a borrower must have a good credit record prior to the default, a stable employment history, verifiable loss of income or increase in living expenses. The borrower must be actively seeking employment without commitment of re-employment at the time of review, be an owner-occupant committed to occupying the property as a primary residence during the term of the forbearance agreement and have not broken any special forbearance plans in the past without good cause.

The agreement must be for a minimum of four months, and while there is no limit on the maximum number of months, at no time may the agreement allow the delinquency to exceed the equivalent of 12 monthly principle, interest, taxes and insurance installments.

HUD requires that the lender verify the borrower's employment status monthly and renegotiate the terms of the special forbearance plan when the borrower's status changes.

HUD also requires the lender to verify that the property has no physical conditions that might adversely impact the borrower's continued use or ability to support the debt, such as repair costs that drain the borrower's monthly resources.

Copyright: Inman News Service

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