The Home Affordable Unemployment Program (UP) – some details

The federal government has come up with one more program, in the series following Home Affordable Modification Program (HAMP) to alleviate the grievances of those – who have experienced a job loss; are behind on mortgage payments or soon will be. This is a supplemental program to HAMP took effect from April 5, 2010, which provides assistance to unemployed borrowers.  This program will be effective for participating mortgage servicers on July 1, 2010 or earlier if the servicers wish to start offering benefits.

According to this new program, the qualified unemployed borrowers of mortgage loans can have a forbearance period, which reduces or suspends their monthly mortgage payment.

Importantly, this program is beneficial for conventional loans only; government loans such as FHA are not included, but refinance options may be taken through FHA mortgage to settle the existing conventional loans.

Mortgage servicers are required to offer UP when the following qualification criteria is met:

• The mortgage loan should have originated on or before January 1, 2009 as a first lien mortgage.
• Secured by a one-to-four unit property – one unit of which is the borrower’s principal residence and the unpaid principal balance (UPB) is equal or less than $729,750 on one unit properties.
• The concerned mortgage loan should not have been previously modified under HAMP and no UP forbearance period has been previously received by the borrower.
• Borrower is unemployed at the date of making the request for UP and is able to provide documentary proof – either they will receive unemployment benefits or have been receiving unemployment benefits at the commencement of the forbearance plan.
• Servicers have the discretion whether or not to require a borrower to have received unemployment benefits for up to three months prior to the commencement of the forbearance plan.
• Borrower is either delinquent on the mortgage repayment, but has not missed more than three consecutive monthly payments or default is reasonably foreseeable.
• It is for the servicer whether to offer UP if a borrower’s total monthly mortgage payment is less than 31 percent of the borrower’s monthly gross income.

It was estimated that around 30% of these homeowners have underwater mortgages and more than 4 million homeowners are in the brink of foreclosures – most of them are even 90 days beyond their dues.

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