Saturday, July 6, 2013

NEW Fannie Mae and Freddie Mac Loan Modification Programs

There is additional (hopefully) good news in regard to loan modifications. Fannie Mae and Freddie Mac want to change the terms of your mortgage – AND, best of all…they want to do so QUICKLY!!! Yes, Government and quickly can exist in the same sentence sometimes!!  
fannie mae loan modification
The Troublesome Twins may hopefully get something right and actually help many home owners with their distressed real estate. At least, that’s what many homeowners with GSE (Government Service Entity)-backed mortgages are hoping to hear this week as the Federal Home Financing Agency (FHFA) initiates its Streamlined Modification Initiative (SMI) this week. Lenders will be responsible for contacting homeowners and offering them modifications with no paperwork. The homeowner simply will have to make three months’ worth of on-time payments for the modification to become permanent. Although the GSEs will not actually reduce principals on loans at this time under THIS program, they could reduce interest rates or extend the life of loans by as much as a decade in order to reduce monthly payments by hundreds of dollars.

In order to qualify for the program, homeowners must have loans at least 12 months old, be no more than 24 months behind on payments, and have principal balances of at least 80 percent of the value of their homes. SMI is scheduled to last through December 2015. The GSEs are encouraging homeowners to contact their lenders if they are experiencing financial hardship rather than waiting for an SMI offer because “in many cases working with the servicer to document the homeowner’s financial situation [something left out of the “streamlined” process] will create a more affordable monthly payment than would be available under [SMI]”.
It is widely believed that this is a limited program and even though it will last for 2.5 years, the number of home owners that will receive loan modifications is unknown. It is also unkown the criteria to be utilized in the determination of who gets relief.

Paddy Deighan J.D. Ph.D


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