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FHA program to give qualifying jobless homeowners a year to miss mortgage payments

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 foreclosure-prevention program.

Starting Aug. 1, the Federal Housing Administration will extend the period for jobless 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 applies only 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, as well as homeowners in the government's Home Affordable Modification Program.

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

Last year, roughly 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 10,000 more unemployed homeowners have taken advantage of a three-month delay in mortgage payments in the past year.

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.

"Our hope is that this will have broader effects," Donovan 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 Barack Obama said Wednesday that the housing market has "been most stubborn to us trying to solve the problem."

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

Homeowners accepted into the foreclosure assistance program receive interest rates as low as 2 percent for five years. They can repay their loans over a longer period.

The median savings for those who remain in the program is about $526 per month.

Those who have their payments delayed must repay them, with interest.

.FAST FACTS

Jobs data

. The number of people applying for unemployment benefits fell last week to the lowest level in seven weeks, although applications remain elevated. The Labor Department said Thursday that applications for benefits dropped by 14,000 to a seasonally adjusted 418,000. The four-week average, a less volatile measure, declined for the first time in four weeks, to 424,750. Applications have topped 400,000 for 13 weeks, evidence the job market has weakened since the start of the year. The government will release its June employment report today.

. Private-sector employment rose 157,000 in June, according to Automatic Data Processing's employment report released Thursday, in what could be a signal that the recent economic soft patch may not last long. The number surprised Wall Street, coming in more than double the 70,000 increase expected by economists.

FHA program to give qualifying jobless homeowners a year to miss mortgage payments 07/07/11 [Last modified: Thursday, July 7, 2011 10:54pm]
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