WASHINGTON: US mortgage finance giant Freddie Mac said Friday it would extend the grace period for unemployed homeowners for up to one year in a bid to reduce defaults that lead to foreclosures.
The government-controlled lender said it was giving mortgage servicers the authority to provide six months to unemployed borrowers to allow them to work out a way to keep up with their payments.
An additional six months could be granted with prior Freddie Mac approval, it said in a statement.
The rules currently in place provide for a forbearance of up to three months with no payment and no prior approval, or six months at a reduced payment with prior approval.
Freddie Mac said that delinquent borrowers in that plan can be evaluated for eligibility for the new longer-term plan.
The new measures will take effect on February 1, Freddie Mac said.
"These expanded forbearance periods will provide families facing prolonged periods of unemployment with a greater measure of security by giving them more time to find new employment and resolve their delinquencies," Tracy Mooney, a senior vice president at Freddie Mac, said in the statement.
According to the lender, nearly 10 percent of delinquencies on its mortgages were tied to borrowers not having jobs.
The policy change comes as authorities grapple with a housing crisis that is still unfolding since a price bubble collapsed in 2006.
The Federal Reserve has repeatedly said that the crisis is one of the main challenges to a sustained economic recovery from the steep recession that ended in June 2009.
The Fed, in an unusual move Wednesday into housing policy, urged Congress and policymakers to step up actions to help stem the tidal wave of foreclosures that is depressing prices, wiping out household wealth and hurting the economy.
The Federal Housing Finance Agency ordered the expanded forbearance policy, Freddie Mac said.
The FHFA oversees Freddie Mac and sister institution Fannie Mae, which were seized by the government in 2008 to prevent their collapse amid the financial crisis.
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