SPRINGDALE — Homeowners who lose their jobs and collect unemployment income now have a better chance to modify their mortgages, according to the U.S. Labor Department.
Until recently, unemployment income was not utilized when calculating a loan modification, leaving distressed homeowners with few options.
Because income is the basis for mortgage modification or loan qualification, unless a unemployed borrower had some other source of income they were likely denied help, said Walt Fenton, mortgage specialist with First Security Bank in Fayetteville.
New loan modification programs created through the American Recovery and Reinvestment Act of 2009 allow mortgage companies to utilize nine months of a homeowner's unemployment insurance income as part of determining his qualifications for a loan modification, according to the Labor Department release.
Recent extensions of unemployment benefits have made this possible, and a new benefit estimation tool made available by the Labor Department will make it easier to calculate benefits over several months, the release said.
The Hope Now Alliance, a government initiative to help distressed borrowers with Federal Housing Administration loans, reports 1,743 mortgage workout repayment plans and 920 mortgage loan modifications were completed in Arkansas in the second quarter of this year. During the same period there were 12,723 mortgage loans in Arkansas at least 60 days delinquent.
Rising unemployment rates and a longer duration of unemployment has complicated the loan modification process for many, Fenton said.
Another major criteria for determining eligibility for loan modification is demonstrating significant financial hardship, said Charles Platt, retail sales manager for Wells Fargo Mortgage in Springdale.
"We have several clients who don't qualify for a loan modification despite the fact their income has shrunk from underemployment and furloughs," Platt said.
In cases like this, he said refinancing at a lower rate is about the only alternative and that is only possible if credit ratings are adequate.
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