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Fannie Mae Military Forbearance is Mostly Toothless Goodwill

Fannie Mae recently announced a new loan forbearance program specifically for military members. If you’d like to know all of the details you can visit the website for the program here, but I’ll give you the highlights:

IF:

  • You are ineligible or do not want to refinance
  • You are facing a financial hardship due to either an injury or loss of spouse in active duty
  • You are several months behind on your mortgage payments

Then This Program Will:

  • Lower or temporarily suspend your monthly payment for up to 6 months—giving you time to improve your financial situation and get back on your feet
  • No adverse credit reporting (related to your mortgage loan) during the forbearance period
  • Stay in your home and avoid foreclosure

However:

  • you will need to repay the amount that was reduced or suspended.  You can do this by moving the payments to the end of your mortgage, which will lengthen the term; making a one-time payment for the amount; or adding a specific amount to your payments each month until the entire amount is repaid

Does this make for good headlines in the newspapers about lenders playing nice with struggling military families?  YES.  Does it help struggling homeowners with a solution for long term stability?  NO.

If a spouse in injured or lost in the line of duty, their spouse could end up having trouble making ends meet (understandably), so the idea is to give them extra time to get back on their feet and come up with a solution.  What it doesn’t do is help them actually find a financial solution.  If a widowed wife or wounded warrior is behind on their mortgage, they may be able to get the clock frozen, but it doesn’t help with the other associated  problems that these folks are likely to be facing, such as severely underwater equity, newly unaffordable monthly payments, sudden loss or reduction of income, etc.

The program could be just what the doctor ordered for people struggling while they wait for some sort of large lump sum insurance payout, but I suspect that the demographic of people who will actually be “saved” from foreclosure with this program is fairly small.

It stinks to see people risking and sacrificing their lives to protect our country only to have their mortgage lender say “Thanks for your sacrifice, as a reward we’re gonna wait six extra months before we foreclose and throw your family on the street”.  If Fannie Mae really wants to help, how about ensuring principle/payment reductions or guaranteed refinance options to help out those who have given so much to our country?  It’s a crime that this is the best they can do.

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