Becoming unemployed is a very difficult process to deal with, but it can be even worse for anyone with a mortgage. During the recent economic crisis, many homeowners were laid off without warning, putting them at risk of having their homes foreclosed on. Fortunately, the government stepped in with several different programs that are designed to help unemployed homeowners keep up with their mortgages.
Emergency Homeowners Loan Program (EHLP)
Anyone who has recently become unemployed, had a reduction in income, or suffered from a medical emergency might be eligible for EHLP. The EHLP provides special 0 percent interest loans that don’t have to be repaid as long as certain conditions are met. The loan can go as high as $50,000. There are a couple requirements that need to be met for eligibility.
- The applicant must have a minimum of 15% reduction of their household income. This can be caused by involuntary unemployment or unemployment from a medical emergency.
- The total income of the household must be 120% less than the applicant’s area median income.
- The applicant must be 3 months behind on their mortgage payments, or at the risk of having their home foreclosed on.
Home Affordable Unemployment Program (UP)
UP is another program that’s designed to help anyone who is unemployed and struggling with their mortgage. It is actually part of another program, The Home Affordable Modification Program (HAMP). UP is different from EHLP. Instead of providing a loan to the homeowner, UP modifies how much the applicant owes on their mortgage. This happens in one of two ways. One option is the mortgage is reduced to no more than 31% of whatever income the applicant is receiving. The other option is the mortgage gets suspended entirely for 12 or more months. This option is only available if the applicant is on their first mortgage. Either plan lasts until a set date, or until the applicant has found new employment. In order to be eligible:
- Applicants have to be able to prove they are unemployed, and that the house they live in is their primary residence.
- The loan hasn’t been modified by HAMP, and originated on or before January 1st, 2009.
- The unpaid balance on the home has to equal less than $729,750.
- The applicant’s mortgage cannot be held by either Fannie Mae or Freddie Mac, since they have their own similar, but separate programs.
Loan Forbearance Plans
Loan forbearance plans refer to several different programs that will reduce or outright suspend how much a homeowner has to pay on their mortgage. They’re very similar to UP, but offer a few different options. They are separated into 3 different plans, a special loan, an informal plan, and a formal plan. Loan forbearance plans can be harder to get and are best pursued with a mortgage counselor.
A special loan forbearance is a written agreement between the homeowner and their mortgage provider. It can reinstate a loan that hasn’t been paid within the last 90 days or more. In most cases, these loans also give the homeowner either a chance to lower their monthly payments, or outright suspend them for a period of time. Under a special loan, the applicant has to become employed again sometime within the next year. After that, they will be reevaluated. If they just started the job, or it’s a job that doesn’t pay as much as their last one, the terms of the agreement might be extended.
See if You Qualify for a Special Loan
Qualification for a special loan is relatively simple. The applicant must not owe more than 12 months worth of payment on their home. Other than that, they simply need to be able to prove that their income will be high enough to pay the loan back in the following year.
An informal forbearance plan is meant for someone that knows their unemployment will be for a short period of time. If they know they will have a new job within the next 3 months, they can get a temporary suspension on their mortgage. Typically, this is for someone who lost their job, but lined up a new job somewhere else that doesn’t start immediately.
A formal forbearance plan is a modified version of the informal plan. Instead of being verbal, it is a written agreement, and the time is extended up to 6 months. In either plan, the applicant has to be able to show that they will start receiving income in the necessary time frame.