As you might have heard by now, more help is on the way for unemployed homeowners who are struggling to keep up with their mortgage payments.
But not all of those who are jobless and delinquent on their mortgages will qualify for assistance.
The Department of Housing and Urban Development recently announced that starting Aug. 1 the minimum forbearance period on two anti-foreclosure programs will be extended to one year. Lenders have until Oct. 1 to implement the change.
But the rule applies only to loans insured by the Federal Housing Administration. Even though HUD has asked lenders participating in the Making Home Affordable Program to extend their forbearance periods as well, lenders can refuse to do it if it conflicts with their investor guidelines.
That means few borrowers will benefit from HUD's latest effort. Less than 20 percent of loans that were more than 90 days delinquent in the first quarter of this year were FHA-insured, according to the Mortgage Bankers Association.
In case you don't know or remember whether your loan is FHA-insured, look at you closing documents and see if you find an FHA case number, or call your lender and ask. In order to qualify for forbearance, your loan needs to be at least three months past due. Some borrowers criticize that requirement because it forces them to damage their credit in order to benefit from the program.
This is from Tracy C., a reader who commented on a recent blog post:
I don't understand why someone has to wreck their credit by defaulting for 3 months in order to get help. My unemployment just ran out and I have only $400 a month coming in for child support. In 15 years I've never been late in paying my house payment and now I'm forced to use my retirement money to save my house!
Borrowers who missed more than 12 payments also don't qualify. And remember, you must be able to show you lost your job through no fault of your own.
If you do qualify, don't think of this as free money. Your loan will continue to accrue interest and you will later have to pay back the monthly payments that you skip.
Does that mean you'll have to pay it all at once when you find a job? Probably not. Lenders will offer various payment options, including adding the amount accumulated during forbearance to the back to the loan or a monthly payment plan added to your mortgage payments, says a HUD spokesman.
Some critics say these programs are waste of time and effort, as it may just delay inevitable foreclosures. Others claim the reason these programs have failed is they are too narrow and don't help the majority of unemployed homeowners.
What do you think? Enough help? Too much help? Or just another failed government program?