NEW YORK, Sept 21 (Reuters) - Fannie Mae, the largest provider of U.S. home loan funding, on Tuesday said it will no longer count unemployment benefits as income when troubled borrowers are applying for loan modification.
The new requirement will be effective Nov. 1, the company said in a statement to mortgage servicers.
The change could reduce the number of borrowers eligible for the federal Home Affordable Modification Program, which is aimed at curbing the foreclosure crisis by easing terms of existing loans. Including unemployment benefits for a limited period was seen by analysts as a way to expand the reach of HAMP, which was hoped to help up to four million borrowers.
But restrictions on income may help limit the number of borrowers that re-default after receiving a modification.
Modifications in the first two quarters of 2010 by Fannie Mae FNMA.OB and Freddie Mac FMCC.OB are performing better three months after completion, compared to loans modified in earlier periods, the Federal Housing Finance Agency said in a report this month.
Fannie Mae also made changes to its forbearance policy, including requiring mortgage servicers to get written approval for forbearances longer than six months.
A Fannie Mae spokewoman had no immediate comment.
Reporting by Al Yoon