Recently Unemployed, options?

**mboyd** · 06-11-2012, 05:18 PM

Hi,

My company just laid me off last week and I am trying to avoid future mortgage payment issues. My loan is with Citi and is backed by Freddie Mac. We have never been late. I would like to see about reducing monthly payments based on my new 'lack' of income. I am curious what options are available? We do not plan to move or sell the house.

Thanks,
mboyd

**Evan Bedard** · 06-11-2012, 08:55 PM

Welcome and thanks for joining the forum.

First off I just want to say I'm very sorry to hear about the recent layoff that is very unfortunate. Since you are now unemployed and your mortgage is owned by Freddie Mac there are a couple of programs available that will allow you to make reduced payments for a period of 6-12 months (known as a forbearance period) while you work on finding employment. Upon finding employment your servicer will be able to review your account for a permanent loan modification which can add any past due amounts to the back of the loan and lower your current payments as well. Below is information on the government Home Affordable Unemployment Program and the forbearance program specialized for mortgages backed by Freddie Mac.

Home Affordable Unemployment Program (UP)

If you are unemployed and depending on your situation, MHA's Home Affordable Unemployment Program (UP) may reduce your mortgage payments to 31 percent of your income or suspend them altogether for 12 months or more.

You may be eligible for UP if you meet all of the following criteria:

You are unemployed and eligible for unemployment benefits.
You occupy the house as your primary residence.
You have not previously received a HAMPSM modification.
You obtained your mortgage on or before January 1, 2009.
You owe up to $729,750 on your home.

*Eligibility criteria are for guidance only. Contact your mortgage servicer to see if you are eligible for UP.

Freddie Mac short-term and extended unemployment forbearance

If a Borrower has a hardship due to unemployment, the Servicer must first consider the Borrower for short-term unemployment forbearance relief prior to pursuing other alternatives to foreclosure under the Guide. Short-term unemployment forbearance offers Mortgage payment relief for a period of six months. However, the short-term unemployment forbearance must terminate when the Servicer receives notification of the Borrower’s re-employment.

If the Borrower is still unemployed during the final month of the short-term unemployment forbearance period, the Servicer must consider the Borrower for extended unemployment forbearance relief. Extended unemployment forbearance provides Mortgage payment relief for up to an additional six months. However, extended unemployment forbearance may not extend beyond a date that would cause the Delinquency to exceed 12 months of the Borrower’s contractual Mortgage payment, including taxes and insurance, if the Servicer is collecting Escrows for such expenses.

If the Borrower regains employment or is otherwise ineligible for extended unemployment forbearance the Borrower must cure the Delinquency through a full reinstatement, payoff or a repayment plan. If unable to do so, the Borrower must be considered for another workout option in accordance with the evaluation hierarchy outlined in Section 64.6(a).

**mboyd** · 06-12-2012, 07:03 AM

Thanks Evan. I was thinking about asking Citi for a loan modification. Our mortgage payment is about $1500/mo now, and our new monthly income will be about $3000 (my unemployment checks plus wife's disability check). It seems loan mod's try to reflect being able to make a payment of 31% of your monthly income? - which would be about $960. Our loan is a 30 yr fixed at 5.625% (I think we secured the loan in 2007 timeframe). I am hoping Citi will work with us on reducing the interest rate to meet the new goal. I suppose they could also increase the loan repayment timeframe.

What are your thoughts? Should I post this over in the load mod forum instead?
Thanks for your advice!
mboyd

**Evan Bedard** · 06-12-2012, 07:58 AM

Our mortgage payment is about $1500/mo now, and our new monthly income will be about $3000 (my unemployment checks plus wife's disability check). It seems loan mod's try to reflect being able to make a payment of 31% of your monthly income? - which would be about $960. Our loan is a 30 yr fixed at 5.625% (I think we secured the loan in 2007 timeframe). I am hoping Citi will work with us on reducing the interest rate to meet the new goal.

I agree with you and a loan modification is the best option to try and lower your current rate. However, I suggested the forbearance because your lender cannot review your account for a loan modification based off unemployment earnings as it is not a permanent source of income, that is why they offer these forbearance plans. It gives you time to make reduced payments while you work on finding a new job, and upon entering new employment you can submit your new paystubs and have your account reviewed for a modification.

**mboyd** · 06-12-2012, 08:11 AM

Ah, ok. I suppose my first plan of action is to call my lender and explain my situation and see what they say, correct? If it ends up being a forbearance, that won't ruin my credit will it? I assume my credit would be ruined worse if I choose to do nothing and start missing payments. As of now I have about 800 FICO score. I hope the lender is up front and doesn't hit me with hidden fees and such - I just hear so many bad stories these days, I don't want to fall victim as well.
Thank for your advice Evan, I appreciate it.

**Evan Bedard** · 06-12-2012, 08:33 AM

The forbearance may have an affect on your credit rating since you are making reduced payments, but the hit won't be nearly as bad as if you stopped making payments all together. If you type in "forbearance" or "Freddie Mac forbearance" in the google search bar at the top right hand corner of the page you will find many other members here in the forum who have been through a forbearance themselves and that should give you a better idea of what to expect entering the plan.

**mboyd** · 06-12-2012, 08:39 AM

Great, thanks Evan. Any suggestions/tips on what or what not to ask my lender when I call? Or like you said just google on this forum and see how others have handled things?

**Evan Bedard** · 06-12-2012, 09:46 AM

Personally I would call in and let them know that you have recently became unemployed and would like to know what options may be available since your mortgage is backed by Freddie Mac. One other question, do you have a significant amount of money saved up at this time?

**mboyd** · 06-12-2012, 10:22 AM

Unfortunately, I don't have much money at all saved up. My division was downsized with no warning, I had worked there just over 20 years. This was a total shocker. I'll likely have to dive into my 401k, which I know is last resort.

**Evan Bedard** · 06-12-2012, 02:14 PM

Yes I would not suggest exhausting your savings or your 401k and only use these funds as a last resort.. I just asked if you had a good amount saved up because they are sometimes hesitant to offer a forbearance if your bank statements show you have the means to make your payments.