Government-sponsored enterprise (GSE) Fannie Mae (FNM) said today it will begin forbearing on borrowers affected by defective drywall. The GSE will direct its servicers to provide up to six months of mortgage loan forbearance on qualifying borrowers under Fannie's "unusual hardships" policy. "This relief is intended to help borrowers who need payment flexibility as they take steps to mitigate problems with problem drywall," said Fannie executive vice president Terry Edwards, in a statement. "The issue potentially affects thousands of homeowners in a number of states, and we want to support those who are responsibly trying to honor their mortgage obligation in good faith while correcting the problem and protecting the health and safety of their families." Defective drywall was found to be imported in large quantities and used by some homebuilders and contractors during the housing boom and after the Gulf Coast hurricanes in 2005. The defective drywall has been linked to possible health effects in coastal states like Louisiana and Florida and has been reported to cause corrosion of electrical wiring, appliances, heating and air conditioning systems and other fixtures. Fannie servicers will be required to document and evaluate each borrower's circumstances on a case-by-case basis, and order a property inspection to confirm the problem drywall. When a servicer determines the problem drywall constitutes an unusual hardship that affects the borrower's ability to continue making mortgage payments, the servicer may offer forbearance terms initially for no more than six months. The GSE will also direct servicers to minimize the credit impact for eligible borrowers. For a borrower who is current when the forbearance is granted, the servicer will report as "current but on a modified payment." Write to Diana Golobay. Disclosure: the author holds no relevant investments.