HUD Archives: News Releases

HUD No. 02-104 For Release
October 1, 2002

Special Forbearance Initiative: HUD Uses Loss Mitigation Tool to Avoid Foreclosure

WASHINGTON - Families with FHA-insured mortgages will receive immediate assistance to keep a roof over their heads, thanks to an Administration initiative announced today by HUD Secretary Mel Martinez. HUD's Special Forbearance Initiative will permit lenders of FHA-insured mortgages to assist creditworthy borrowers who are behind
in making mortgage payments because they are temporarily unemployed.

The initiative, which was recently distributed to FHA approved lenders, is expected to help thousands of
homeowners avoid losing their homes through foreclosure. In fiscal year 2002, the Department helped more than 64,000 FHA-insured homeowners avoid foreclosure. That number is expected to rise during the coming year.

"The loss of your home because of temporary unemployment can make an already difficult situation much worse,"
said Martinez. "The plan that I'm announcing today will help individuals and families with good credit records keep
their homes, and for most their largest investment, while they look for work and get themselves back on their feet."

Under the terms of the initiative, a lender may enter into a written special forbearance agreement with a borrower whose mortgage is at least three months but not more than 12 months overdue, and whose loan is not in
foreclosure at the time the agreement is executed.

To be eligible, the borrower must:

  • Have prior to this default a good payment record and a stable employment history;
  • Have a verifiable loss of income or increase in living expenses;
  • Be actively seeking employment, but have not received a commitment of re-employment at the time
    the lender is reviewing the borrower's financial information; and,
  • Be an owner-occupant, committed to occupying the property as a primary residence during the term
    of the special forbearance agreement

The special forbearance initiative will not be offered to borrowers who have repeatedly broken past informal or
formal forbearance plans without good cause.

The agreement must be for a minimum of four months. While there is no limit on the maximum number of months,
at no time may the agreement allow the delinquency to exceed the equivalent of 12 monthly PITI -- principle, interest, taxes and insurance -- installments.

HUD requires that the lender verify the borrower's employment status monthly and renegotiate the terms of the special forbearance plan when the borrower's status changes.

HUD also requires the lender to verify that the property has no physical conditions that might adversely impact the borrower's continued use or ability to support the debt. A borrower will not be able to obtain a special forbearance
if the property is in such a deteriorated condition that repairs drain the borrower's monthly resources.

HUD is the nation's housing agency committed to increasing homeownership, particularly among minorities, creating affordable housing opportunities for low-income Americans, supporting the homeless, elderly, people with disabilities and people living with AIDS. The Department also promotes economic and community development as well as
enforces the nation's fair housing laws. More information about HUD and its programs is available on the Internet at


Content Archived: March 15, 2011