A new program called The Home Affordable Unemployment Program has been announced by the Treasury Department, and took effect on July 1, 2010. This new program provides servicers the flexibility to provide assistance to borrowers whose hardship is related to unemployment. According to this new program, when a borrower is unemployed, a HAMP trial period plan or permanent HAMP modification may not be offered to the borrower as the borrower may not have the ability to make the required payments.
If a borrower is unemployed, and is currently receiving unemployment compensation, and states unemployment compensation as the sole source of income on the HAMP application, the servicer will be required to consider eligible borrowers for the Home Affordable Unemployment Program. Under the Home Affordable Unemployment Program, a servicer will grant borrowers a forbearance plan during which regular monthly mortgage payments are reduced or suspended. During this trial period plan, borrowers will be evaluated for HAMP. A borrower who is unemployed and requests assistance under HAMP must be evaluated for and, if qualified, receive an Unemployment Program (UP) forbearance plan before the borrower may be considered for HAMP.
Servicers are required to offer an Unemployment Program forbearance plan to a borrower who meets the following HAMP minimum eligibility criteria:
-The mortgage loan is secured by a one- to four-unit property, one unit of which is the borrower’s principal residence.
-The mortgage loan is a first lien mortgage loan originated on or before January 1, 2009.
-The current unpaid principal balance of the mortgage loan is equal to or less than $729,750.1
-The mortgage loan is delinquent or default is reasonably foreseeable.
-The mortgage loan has not been previously modified under HAMP and the borrower has not previously received an UP forbearance period.
Additional UP forbearance plan eligibility requirements include that the borrower:
-Makes a request before the first mortgage lien is seriously delinquent (before three monthly payments are due and unpaid). A request for UP may be made by phone, mail or email. Servicers must document the date of the UP request in the servicing file and, within 10 business days, confirm the receipt of the request with the borrower via mail or return email.
-Is unemployed at the date of the request for UP and is able to document that he or she will receive unemployment benefits in the month of the Forbearance Period Effective Date (defined below) even if his or her unemployment benefit eligibility is scheduled to expire before the end of the UP forbearance period.
The servicer may require a borrower to have received unemployment benefits for up to three months before the forbearance period will begin. A borrower who has received unemployment benefits for less than the minimum time period required by the servicer may request consideration for an UP forbearance plan; however, the forbearance period will not begin until after the borrower has received unemployment benefits as required by the servicer.
To be eligible for HAMP, a borrower’s total monthly mortgage payment (principal, interest, taxes, insurance and association fees, if any) prior to the modification must exceed 31 percent of the borrower’s gross income. To streamline the delivery of unemployment assistance, a servicer may waive this criterion for UP forbearance plan eligibility. However, servicers are not required to offer an UP forbearance plan to borrowers whose total monthly mortgage payment is less than or equal to 31 percent of the borrower’s monthly gross income, including unemployment benefits. Servicers are not required to offer an UP forbearance plan if a household member that is not a borrower becomes unemployed, even if that income contributed to the mortgage payment.