The Mortgage Bankers Association (MBA) is being inundated by member complaints about the Federal Housing Administration's (FHA) policy decision to extend the forbearance period for unemployed homeowners to 12 months.

Servicers of Ginnie Mae MBS are already required to advance the principal and interest payments to bond investors during a four-month forbearance period and pay taxes and homeowner's insurance if necessary.

The new policy, which went into effect Aug. 1, increases that expense by another eight months.

While the forbearance extension was well intended (designed to keep unemployed borrowers in their homes) it has become an expensive burden for Ginnie Mae servicers as well as community banks, credit unions and small mortgage banking firms, according to MBA senior vice president Stephen O'Connor.

"Many of the small servicers we talked with stated that the cost of the new forbearance program will force them out of the servicing business," O'Connor said in a recent letter to Ginnie Mae and FHA officials.

MBA is urging FHA to cover the cost of the extended forbearance policy.

"We believe that this is a cost that all taxpayers should share," the trade group writes.

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