Fannie Mae: HAMP harder to qualify, foreclosures speed upby Tim Manni
Beginning on November 1, 2010, Fannie Mae will no longer consider unemployment benefits as income for borrowers applying for HAMP. Fannie hopes that the new restriction will serve to curb the large number of HAMP redefaults. This will also mean that fewer borrowers will qualify for the federal modification effort.
Banks have same restrictions
Fannie Mae’s new stance also prevents banks from using unemployment benefits in their own proprietary modification programs if the loan is backed by the mortgage finance company.
The unemployed account for most of the new delinquencies in the mortgage market, experts say. Many depended on using their jobless benefits to qualify them for modifications.
However, the growing focus on the sustainability of these modifications have raised questions about counting temporary benefits as an income source.
Still options for the unemployed
Instead of considering unemployment benefits as income under HAMP, Fannie Mae will instead evaluate unemployed borrowers for a forbearance period of up to six months. The forbearance plan will either reduce borrowers’ monthly payments or eliminate them altogether for a set period of time.
Fannie has been making a lot of changes
Earlier this month, Fannie Mae told servicers that they need to speed up their handling of troubled loans. Fannie warned servicers that they will fine them if they fail to deal with the troubled mortgages in a swift and timely manner:
Mortgage servicers have come under intense scrutiny as they have struggled with record delinquencies and foreclosures. Their efforts to ease payments on loans to avert default have fallen short in many cases, playing some role in disappointing results of a federal program to refinance or modify mortgages.
“A compensatory fee not only compensates Fannie Mae for damages but also emphasizes the importance placed on a particular aspect of a servicer’s performance,” Fannie Mae said in an announcement to servicers.
“In some cases, a compensatory fee will relate to the action a servicer took, or failed to take, in handling a specific mortgage loan,” it said.
What does this mean for borrowers? If you’re behind on your mortgage and don’t qualify for a modification or a refinance, that foreclosure notice might be coming sooner then you think.