The Mortgage Bankers Association (MBA) is pitching a new foreclosure prevention program designed to help homeowners who’ve lost their jobs.

The group is proposing that loan servicers reduce the borrower’s mortgage payment to an affordable amount for up to nine months while the homeowner looks for a new job.

"The vast majority of new distressed borrowers we are seeing involve the loss of income," said John A. Courson, MBA’s president and CEO.  "This program is designed to buy those borrowers time to find a new job, after which they could hopefully qualify for a loan modification."

Under MBA’s proposal, loan servicers that participate in the voluntary program would reduce monthly payments to an affordable level based on household income.   Borrowers would be initially evaluated for the program using a model that assumes the borrower will be reemployed within nine months of losing his or her job at 75 percent of the borrower’s previous salary. 

The borrower would be reevaluated every three months for a total forbearance of nine months.  Once reemployed, the borrower would be evaluated for a modification under the Obama Administration’s Home Affordable Modification Program (HAMP).

"Recent statistics show that the average unemployed U.S. worker stays unemployed for between six and seven months," added Courson.  "That is a long time for a borrower with a dramatic drop in income to stay current on their mortgage.  Further, borrowers with such a precipitous drop in income can’t qualify for most loan modification programs, so we are looking for ways to allow those borrowers to keep their homes while they look for another job."

MBA suggests that some participating servicers would need access to special loans through the Treasury Department to supply funds to servicers so they could continue to advance payments to investors during the extended forbearance period.