MBA Proposes Forbearance Program to Help Unemployed Borrowers
March 3rd, 2010
At the recent MBA National Servicing Conference in San Diego, the MBA announced a proposal to "add an initial forbearance feature to the federal government's Home Affordable Modification Program (HAMP)". The proposal is intended "to inform and guide an ongoing discussion within the Obama administration as to how to best help unemployed mortgage borrowers"
Additional information is provided in the below MBA Advocacy Update.
MBA Advocacy Update: MBA Submits Proposal to Help Unemployed Borrowers
Today, MBA released a proposal to add an initial forbearance feature to the federal government’s Home Affordable Modification Program (HAMP), which is a product of our Unemployed Borrower Task Force, Chaired by MBA Vice Chair Michael Young. The attached letter and term sheet were provided to Treasury, White House and HUD staff in a meeting with MBA government affairs staff last week. They were released publicly this morning at our National Servicing Conference in San Diego. The proposal is intended to inform and guide an ongoing discussion within the Obama administration as to how to best help unemployed mortgage borrowers.
MBA’s proposal includes the framework of a forbearance program for unemployed owner-occupant borrowers, whether they are current or delinquent, who have involuntarily lost their employment. Under our proposal, loan servicers that participate in this program would reduce monthly payments to an affordable level based on household income. Borrowers would be initially evaluated for the forbearance program using a model that assumes the borrower will be reemployed at 75 percent of their previous salary. The borrower would be reevaluated as to employment and income status every three months for a total forbearance of nine months. Once reemployed, the borrower will be evaluated for a HAMP modification.
MBA is advocating that enhancing HAMP in this way is in the best interest of borrowers, servicers, investors and the taxpayers. Borrowers benefit because they get help that is more tailored to their specific situation and many borrowers will qualify for a forbearance that might not qualify for a trial modification, thereby expanding the effectiveness of HAMP. The taxpayers benefit because resources will be spent in the most efficient way by avoiding putting people with temporary problems into permanent solutions paid for in part by the government.
Our proposal was welcomed by Treasury staff, and MBA will continue to work with the administration as it develops a program to better assist unemployed borrowers.
Please let me know if you have any questions.
Steve
Stephen A. O'Connor
Senior Vice President of Government Affairs
Mortgage Bankers Association
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