Mortgage Loan Compliance | FHA’s Temporary Borrower Bail-Out

In 2010, approximately 17,000 homeowners received a government-supported delay on their mortgage payments. About 3,500 borrowers with FHA-insured loans fall behind on their mortgages each month due to unemployment, officials said, and another 10,000 unemployed homeowners have taken advantage of a three-month delay in mortgage payments in the past year.

Starting August 1, 2011 the Federal Housing Administration will extend the period for unemployed homeowners to miss mortgage payments to a full year from three or four months. This will stall the foreclosure process from beginning and will allow qualified homeowners to go without making a monthly payment for 12 months.

The extended grace period only applies to FHA-backed loans, which are usually given to low- and middle-income borrowers and represent about 14 percent of all active mortgages and roughly 25 percent of new mortgages. The grace period also applies to homeowners in the government's Home Affordable Modification Program.

Housing and Urban Development Secretary Shaun Donovan said the change will likely only help "tens of thousands" of homeowners.

Donovan said administration officials hope private lenders and government-controlled mortgage companies Fannie Mae and Freddie Mac, which back 90 percent of all new mortgages, will adopt a similar policy.

New rules already going into effect on October 1, 2011 for mortgage giants allow for long-term forbearance when a home has been destroyed or if the homeowner or a dependent has a long-term disability or illness.

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