Fannie and Freddie will allow qualified homeowners to negotiate a “timeout” from making mortgage payments early 2012. The borrower will be allowed to create a forbearance agreement with the servicer and not make their mortgage payments for up to twelve months.

A qualified borrower here would be one that is either in default or near default due to lack of income and assets. The typical cause would be unemployment which has caused severe financial hardship and depletion of savings.

The parameters are being revealed. The loan must have been obtained between a certain period of time and either owned by Freddie or Fannie. A servicer can approve a borrower for six months without permission from Fannie and Freddie as long as they have exhausted all alternative means for the borrower to continue the payments. Again, the borrower must go through the system with the lender, present documentation and qualify before they can stop making the payments.

Will this help the system just add more work to a limited untrained staff of the lenders who are already exploding with paperwork from short sales and foreclosures that never seem to make it through the system? As the program develops, we will be able to see if this offers any relief to homeowners who can keep their homes for the long term, but just need a temporary break.