02 Jul FHFA Offers New Streamlined Loan Modification
If you are interested in modifying your home mortgage, and your mortgage is insured by Fannie Mae or Freddie Mac, I may have some good news for you. I say “may” advisedly. Not only have previous programs not worked all that well, there are some very specific guidelines for this one, and if you don’t fit the guidelines, well, presumably you are out of luck. The good news is that if you do fit, you may get a chance to modify your home mortgage without going through the documentation purgatory that has plagued previous programs and limited their effectiveness. In fact, the idea is that your mortgage servicer will offer it to you.
The new program is titled Streamlined Modification Initiative. I admire the straightforward descriptive nature of that, although it does sound more like a NASA program than a mortgage mod program. This one is brought to you by the Federal Housing Finance Agency, the agency that was created to oversee Fannie Mae and Freddie Mac when those two mortgage giants imploded at the government’s expense. Starting July 1, mortgage servicers will be “required” to offer eligible borrowers who are at least 90 days delinquent on their mortgage a way to lower monthly payments without requiring financial or hardship documentation. The point is to eliminate the administrative barriers associated with document collection and evaluation. I’ve got to give them credit for trying to address the giant roadblock that the paperwork represents under previous programs–both producing the paperwork for borrowers, and evaluating the paperwork for servicers.
The loan must be owned or guaranteed by Fannie Mae or Freddie Mac. Homeowners must be 90 days to 24 months delinquent, and have a first-lien mortgage that is at least 12 months old with a loan-to-value ratio equal to or greater than 80 percent. Loans that have been modified at least two times previously arenâ€™t eligible.
Starting July 1, mortgage servicers who are servicing Fannie and Freddie loans are supposed to review their records to identify homeowners who qualify, and send them an offer. The offer will include trial payments; the homeowner accepts the offer by making the proposed payments.
It occurs to me that this program is so contrary to the usual nightmare of paperwork blizzards, arcane requirements, and endless delays that it might seem too easy. I can imagine homeowners who get offers from their servicers and ignore them, in the belief that it just seems too good to be true. And that may turn out to be the case. Hopefully this program will offer the practical solution that the real estate market and so many homeowners need. Only time will tell.
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