The FHA announced a change to its current policy on handling unemployed homeowners currently unable to make their monthly mortgage payments. Up until the change in policy, unemployed homeowners were qualified for up to a four-month forbearance period. Essentially four months of not paying their mortgage without incurring late fees, default status, and not having the missed payments reported to the credit bureau. Along these same lines, President Obama has commented that other lenders, not just Fannie and Freddie, who are actively participating in the often criticized Making Home Affordable Program, to extend their three-month forbearance periods up to a full calendar year.
While this is absolutely a step in the right direction and provides much needed assistance for the hundreds of thousands of Americans unemployed and/or unable to make mortgage payments. However, there is a question that must be asked…..AND THEN WHAT? So what happens after the 12 month forbearance period? Where do those missed payments go? Surprise surprise….but those missed payments just get lumped in as principal…making the bank even richer….and making it even more difficult for the home owner to make future payments.
This poses an even more fundamental issue with all of these fixes and ideas being utilized to fix the epidemic…Do the banks really want to help? I suppose they do….or at minimum….they have to appear to care. Otherwise the “people” would not be happy. I have been saying it all along….but if the banks are so willing to forbear payments….modify loans…and grant short sales…..why not simply offer principal reductions?
Imagine the banks adjusting the mortgage amount to 95% of the Fair Market Value…..
We would have a Country where people could make their payments….would have a tad of equity….and ultimately be free from the chains of debt, but what kind of place would that be?
To read more about this ….go to this article from Boston.com READ HERE