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December 22nd, 2010

Unemployed homeowners: Don’t let your benefits lapse!

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Job Market Unemployed, but doing everything you possibly can to keep your home? If so, it’s important to understand that if you’re more than three months delinquent on your mortgage payments, you won’t qualify for the latest initiative to assist unemployed homeowners. That’s why it’s more important than ever to understand the latest extension of unemployment benefits.

President Obama signed a law extending unemployment benefits for another 13 months when he signed a larger tax-cut bill on December 17, 2010. However, those who have already collected 99 months worth of benefits will not be collecting additional money.

Unemployment benefits extension: Who gets what?

The expiration of extended unemployment benefits on November 30, 2010 meant unemployed Americans got checks only until the end of whatever tier of unemployment they were in. The recent unemployment extension grants additional benefits for those who had not yet exhausted their full 99 weeks. There is no extension, however, for those who have collected benefits for a full 99 weeks–about 4 million Americans, and an additional 4 million will lose benefits in early 2011. If you have not yet exhausted your benefits, it is absolutely critical that you act to save your home before it’s too late.

Mortgage modification plan for the unemployed

The Home Affordable Unemployment Program (UP) was added to the Making Home Affordable arsenal in May, and as of August 1, unemployment benefits will only be considered for UP and not for HAMP mortgage modification applications. UP is a forbearance plan for qualified borrowers which temporarily reduces (to no more than 31 percent of their gross income) or eliminates their mortgage payments for a period of time.

If you are facing the prospect of losing your unemployment benefits and have a mortgage, you have no time to waste. It is absolutely crucial that you understand that once you are more than three months late on your mortgage, you are too late to qualify for this program. By acting now you might be able to save your home. With the UP, mortgage servicers must offer a forbearance plan to borrowers who meet the following criteria:

  • The property must be a principal residence and consist of one to four units.
  • The mortgage must have been originated before January 1, 2009, and the current unpaid principal balance cannot exceed $729,750.
  • The mortgage must currently either be in default or at risk of “imminent” default.
  • The mortgage cannot have already been modified under HAMP and you can’t have received a previous UP forbearance.
  • You must request the UP before three monthly payments are due and unpaid. This is the biggie. You can make your request by phone, mail or e-mail, but given mortgage servicers’ track record with HAMP documentation, you should probably get some proof of the timeliness of your request.
  • You must be unemployed and have received at least three months of benefits (this requirement can be waived by the lender or loan servicer at its discretion) on the date you request the UP, and you must document that you will receive benefits in the month of the forbearance period effective date even if the unemployment benefits are scheduled to expire before the end of the UP forbearance period. This means that you won’t be eligible for UP once your benefits expire.
  • The servicer must evaluate you for the program within 10 days, and if they make a determination by the 15th, your forbearance period effective date would most likely be the first day of the following month.

To learn more about how to keep your home, despite being unemployed, please continue reading our article “Unemployed? Save your home before benefits lapse.”

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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