Mortgage and Unemployment Benefits
Though Congress managed to pass a two-year budget agreement before the end of the year, one important issue has still not been resolved: long-term unemployment benefits.
According to the federal government’s definition, long-term unemployment refers to any period of joblessness that extends beyond 26 weeks. During that period, states and the federal government provide unemployment benefits to workers who have lost their jobs. However, during times of high unemployment, the federal government typically provides emergency benefits. In the middle of the last economic crisis, this program was extended to last a maximum of 99 weeks.
The word “typically” is key here. Since Congress did not act to extend benefits before Dec. 28, the program reverted to its original length of 26 weeks. This means that millions of people who have been unemployed for a longer period of time will go without financial help as of this past Saturday.
In many states with particularly high unemployment numbers, there are worries that out of work individuals will have a much harder time keeping up with their mortgage payments.
For example, according to a recent article on Housing Wire, the California Employment Development Department (EDD) sent a letter to more than 220,000 unemployed individuals, warning them of the change and how it would affect their ability to repay mortgages.
The article notes that one organization, Keep Your Home California, does offer up to 12 months of mortgage assistance. However, homeowners can only qualify if they have received unemployment benefits within the last 30 days. If Congress does not make any changes soon, thousands of people may be running out of time.
Risk assessment software can help lenders develop a complete picture of each applicant’s finances and evaluate how a loss of employment could affect their ability to repay a loan. With unemployment benefits being scaled back, this risk factor will be even more critical, especially for borrowers that do no have substantial collateral or other revenue streams.