By Derek Kravitz
AP Economics Writer
WASHINGTON (AP) — The Obama administration is making it easier for out-of-work homeowners to stay in their homes, as it tries to revamp its troubled foreclosure-prevention program.
Starting Aug. 1, the Federal Housing Administration will extend the period for unemployed homeowners to miss mortgage payments to a full year from three or four months.
That will allow qualified homeowners to go without making a monthly payment for 12 months before the foreclosure process begins.
The extended grace period only applies to FHA-backed loans, which are usually given to low- and middle-income borrowers and represent about 14 percent of all active mortgages and roughly 25 percent of new mortgages.
The grace period also applies to homeowners in the government’s Home Affordable Modification Program.
But the change will likely only help “tens of thousands” of homeowners, Housing and Urban Development Secretary Shaun Donovan said last Thursday.
Last year, roughly 17,000 homeowners received a government-supported delay on their mortgage payments.
About 3,500 borrowers with FHA-insured loans fall behind on their mortgages each month due to unemployment, officials said, and another 10,000 unemployed homeowners have taken advantage of a three-month delay in mortgage payments in the past year.
Donovan said administration officials hope private lenders and government-controlled mortgage companies Fannie Mae and Freddie Mac, which back 90 percent of all new mortgages, will adopt a similar policy.
“Our hope is that this will have broader effects,” Donovan said during a conference call.
But Fannie and Freddie signaled they would not be adding a broader, industrywide rule, saying they were confident in their existing policies for homeowners.
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