Helping Unemployed Borrowers Meet Their Mortgage Payments

by James Orr and Joseph Tracy
Federal Reserve Bank of New York
 
With unemployment very high, income loss is now the primary reason for mortgage default. Unemployed homeowners face tough choices. Those with equity in their house may attempt to sell it quickly. Alternatively, to keep their house while seeking a new job, they might deplete their savings, apply for a loan modification, or use other credit. Those with negative equity—who owe more on the mortgage than the property’s current value—have fewer choices, because selling the house won’t pay off the mortgage. All too often the home enters foreclosure and becomes costly for the family and the community. In this post, we examine how states may be able to offer special bridge loans to help jobless homeowners pay their mortgages and help protect neighborhoods and housing markets. Such initiatives could complement existing programs by helping many distressed homeowners before they miss any payments. 
 
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