Freddie Mac and Fannie Mae, the government-sponsored housing finance companies that represent approximately half of all mortgages, have announced plans to offer forbearance to unemployed homeowners.

 Both companies plan to extend their existing programs so that unemployed borrowers can defer part or all of their monthly payments for up to 12 months while they are out of work.

“Forbearance is a real life saver,” Lew Finfer, a community organizer with the PICO National Network told the New York Times in a recent interview.

Extended unemployment is the main cause of foreclosure. The economy can't recover without a strong housing market and that has been severely hampered by the glut of foreclosures. If implemented well, these forbearance policies will greatly lessen foreclosures and add to our economy recovering.

President Obama said in July that housing remained the "most stubborn" problem facing the country and conceded that a raft of federal mortgage aid programs were "not enough, and so we're going back to the drawing board."  Last month, he said, "We're going to keep pushing [the big banks] to provide more time for unemployed homeowners to look for work without having to worry about immediately losing their home.”  These forbearance policies go a ways to realizing these objectives.

Decisions to enact these new forbearance policies were made by FHFA, Treasury Department, and HUD for these forbearance policies, but with critical assistance from members of Congress and community groups including the PICO National Network.

 Since the fall of 2009, the PICO National Network has repeatedly raised the issue of extended unemployment causing foreclosure and the need for a 12-month forbearance policy to save unemployed homeowners from foreclosure. PICO leaders have met multiple times with Treasury and White House officials including meetings with former White House NEC Director Larry Summers, Treasury Secretary Timothy Geithner, and with current White House NEC Director Gene Sperling.

While the announcement of the forbearance policy is a big step forward if implemented well, PICO and allies will continue to organize to protect unemployed homeowners by:

• Clarifying with FHFA, Fannie, and Freddie that banks/servicers must grant this forbearance and don't have any leeway to refuse homeowners who request it.
• Intense outreach to educate the public, the banks/servicers, and nonprofit foreclosure prevention counselors so these policies are implemented thoroughly to save unemployed homeowners from foreclosure.
• Continued work to apply these policies to underemployed people, the homeowners amongst these 7 million who may face foreclosure because they cannot get 40 hours of work in this tough economy.

The big additional needed policy area is principal reduction to help the almost one-third of America's homeowners whose homes are underwater or whose value is less than their mortgage payments.