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Some things you need to know about mortgage forbearance and the gulf oil spill

By Holden Lewis · Bankrate.com
Friday, June 18, 2010
Posted: 5 pm ET

Fannie Mae says it will allow mortgage companies to "immediately suspend or reduce mortgage payments for borrowers whose properties or income are negatively impacted by the Gulf oil spill."

Freddie Mac says lenders "may grant relief to Gulf Coast borrowers unable to pay their loans because of the current oil spill's impact on their incomes."

Sounds good, but there are plenty of rules and requirements to satisfy before the mortgage servicer will grant a forbearance. Ultimately, a forbearance will merely postpone your pain if the oil spill takes away your livelihood for more than six or 12 months. The long-term outlook is grim if you own a shrimp boat in Louisiana or a bed and breakfast in Biloxi, Miss., or if you're a chambermaid in Destin, Fla.

Sorry to get all Debbie Downer on y'all. But if you make your living in the tourism or fishing industry on the Gulf coast, this spill could force you to either change your career or move far away. The spill is not a temporary condition, and a mortgage forbearance is intended to help borrowers through temporary setbacks.

I'll dig into the weeds on this in coming days, describing how to go about getting a forbearance, and the rules surrounding the temporary mortgage break. To show you how arbitrary the process can be, dig this little tidbit:

If your mortgage was securitized by Fannie Mae, the maximum length of your mortgage forbearance depends upon when it was securitized. Specifically, if your mortgage was pooled between June 1, 2007, and Dec. 1, 2008, then you can get a forbearance for six months, and no longer than that. But if your home loan was securitized by Fannie before or after that period, your mortgage forbearance can be extended past six months if necessary.

Bet your local newspaper didn't tell you that factoid.

In coming days and weeks I will go into more detail about Fannie's and Freddie's forbearance offerings. Meantime, I will offer this piece of advice:

Start documenting your work hours and income before and after the spill. If you wait tables at a tourist-oriented seafood restaurant overlooking the Gulf, collect your weekly work schedules going back at least to early April, and keep collecting them in a file folder. Keep a log of your tip and wage income, going back to before the spill and updated every week or two.

Whether you're a fishing guide or an inn owner or a desk clerk at a hotel, maintain an updated record of work hours and income. To get a mortgage forbearance, you'll need to prove that your income went down after the oil spill.

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