Jobless Get Help To Stay In Homes

Longer grace period on some mortgages

The Record ( — Friday, July 8, 2011


WASHINGTON — The Obama administration is making it easier for out-of-work homeowners to stay in their homes, as it tries to revamp its troubled foreclosureprevention program.

Starting Aug. 1, the Federal Housing Administration will extend the period for unemployed homeowners to miss mortgage payments to a full year from three or four months. That will allow qualified homeowners to go without making a monthly payment for 12 months before the foreclosure process begins.

The extended grace period only applies to FHA-backed loans, which are usually given to lowand middle-income borrowers and represent about 14 percent of all active mortgages and roughly 25 percent of new mortgages, and homeowners in the government's foreclosure-prevention program. About 10,000 homeowners in the foreclosure program and 3,500 FHA-backed homeowners per month would be eligible, officials said.

Housing and Urban Development Secretary Shaun Donovan said Thursday that administration officials hope private lenders and government-controlled mortgage giants Fannie Mae and Freddie Mac, which back 90 percent of all new mortgages, will adopt a similar policy.

"Our hope is that this will have broader effects," Donovan said during a conference call.

Sylvine Marabotto, head of the Consumer Credit Counseling Service in Cedar Knolls, said she's "not optimistic" that the change will help homeowners, because lenders have been slow to modify mortgages.

"The problem is that the lenders have to get on board," she said. "It's just very, very difficult to get people to the final stages of loan modification."

Phyllis Salowe-Kaye of New Jersey Citizen Action said the change may give troubled homeowners more time to "work with housing counselors to develop a plan and negotiate with lenders." In New Jersey, the foreclosure process already takes about two years, on average, from the first missed mortgage payment to eviction, she said.

The government launched its chief foreclosure program in 2009 to help those at risk of foreclosure by lowering their monthly payments. Borrowers start with lower payments on a trial basis. But the program has struggled to convert them into permanent loan modifications.

More than 1.6 million troubled homeowners received trial modifications over the past two years. But a majority of the applicants, about 854,000 homeowners, have dropped out of the program entirely.

In recent weeks, administration officials have acknowledged that housing has become a significant drag on the economy. President Obama said the housing market has "been most stubborn to us trying to solve the problem," during a town hall-style meeting Wednesday on Twitter.

He admitted that the government's programs to help homeowners were "not enough" and said the administration was "going back to the drawing board."

Staff Writer Kathleen Lynn contributed to this article.

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