The Obama Administration’s new foreclosure prevention assistance for the unemployed becomes effective July 1, but newly released criteria gives several conditions before a homeowner can qualify.
The program was announced by President Obama in March, part of an expansion of the troubled Home Affordable Modification Program, or HAMP.
The new effort under HAMP is called Home Affordable Unemployment Program, HAUP, and provides a minimum of three months forbearance on a mortgage.
However, a borrower must be entitled to receive unemployment benefits by the first month of the forbearance plan. Mortgage servicers can go further and require a borrower to have received unemployment benefits for up to three months before the start of the program.
The unemployed borrower must request a forbearance plan before becoming seriously delinquent – or missing three monthly mortgage payments, the guidelines say.
Any unemployed borrower applying for HAMP must be evaluated for HAUP. If they qualify, they must be offered the forbearance plan before consideration for HAMP, which reduces monthly payments for an extended period of time.
Under the HAUP forbearance plan, the monthly mortgage payment must be “reduced to less than or equal to 31 percent of the borrower’s gross monthly household income,” according to servicer guidelines.
The term of the forbearance must be at least three months.
“Servicers may extend this period according to their investor/regulatory guidelines,” HAUP rules say.
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