You have to live in the home to qualify, and the mortgage balance has to be less than $729,750, with a monthly payment that represents more than 31 percent of the gross monthly income of all borrowers who signed your mortgage, before you subtract anything for taxes or deductions. If one person in the household works and one is unemployed, you will not be eligible if the loan payment is under 31 percent of your current total household income.
Also, you need to prove that you are receiving unemployment benefits and ask for help within 90 days of any late payments.
The lowered payments would revert to the regular amounts once you got a job, if you became employed before the three- to six-month period ended.
Your property will need to be worth at least 15 percent less than the value of your first mortgage for you to qualify. If your mortgage has already been modified to lower your interest and monthly payments, you may still be eligible.
To qualify, you need to live in your home, have a mortgage under $729,750 and have a mortgage payment more than 31 percent of your gross monthly income.
Any principal forgiveness will take place in three equal amounts over the course of three years but only if you make your mortgage payments on time.
But banks are not required to participate.
Your current mortgage holder is not required to write down any principal, but if it does decide to participate, it will have to agree to write down at least 10 percent of the value of your first mortgage. And your current loan cannot itself be an F.H.A. mortgage.
Also, your payment under any new F.H.A. loan must be less than 31 percent of your gross monthly income, and your total household debt can’t be more than about 50 percent of your income unless you have an excellent credit history.
If your mortgage holder writes down some of your principal, there’s a chance that won’t be a black mark on your credit report, but the exact impact is still unclear.
As of November, the credit reports of borrowers who had been participating in earlier mortgage modification program weren’t necessarily affected just by virtue of their participation. That’s because the Treasury Department and the Consumer Data Industry Association, which represents credit reporting agencies, created a new code for loans modified under a federal government plan. They recommended that lenders use the code but did not require it. In the near term, FICO is ignoring that code in its credit scoring formula.
It’s possible, however, that banks will treat some or all of the new principal forgiveness programs in a different way that could harm participants’ credit reports. A spokesman for the Consumer Data Industry Association said he was still working out what code or codes ought to apply. The federal agencies involved do not tell lenders how to report participation in the programs.
Meanwhile, if you participate in the temporary payment reduction program for unemployed people, you will probably see some damage to your credit report.
Your lender is supposed to contact people who are eligible for help, but it’s probably best to call in periodically yourself for updates if you think you may be eligible.