Fannie Mae and Freddie Mac are touting their streamlined loan modification implementation with the hopes of keeping more people in their homes and bringing more loans to performing status. Is it enough? Is it going to work? With more and more homes losing value and homeowners being upside down in their homes, I believe without principal reductions, this effort is lukewarm at best. It is already stated that 50% of modified loans end up in default a couple of months later. Any thoughts?
- Kathleen
FHFA Announces Successful Implementation of Streamlined Modification Program
Carrie Bay | 12.18.08
Representatives of the Federal Housing Finance Agency (FHFA), Fannie Mae, Freddie Mac, and HOPE NOW announced today that the Streamlined Modification Program (SMP) was successfully launched December 15th as plotted – three days after Fannie and Freddie sent detailed implementation instructions to their servicers. The SMP, which was developed by the four organizations in conjunction with mortgage servicers from the industry, is already making progress in preventing foreclosures, FHFA said in a press statement.
“Foreclosure prevention is critical for individuals and families, their communities, and the overall housing market,” said FHFA Director James B. Lockhart. “I am pleased that our program is being rolled out right on schedule and that servicers are already working at modifying delinquent loans with the goal of keeping people in their homes.”The SMP is designed to be a streamlined process for modifying the loans of a large number of borrowers who are seriously delinquent on their mortgage payment and are threatened by foreclosure. The new program replaces several time-consuming steps in a traditional loan modification with a uniform process that uses standard eligibility requirements and documents.
To be considered for the program, borrowers are instructed to contact their servicer, who will try to arrange an affordable monthly mortgage payment. If the servicer is unable to make an affordable payment with this streamlined program, it will further evaluate the borrower’s situation through a customized process. The key to success is the borrower’s ongoing cooperation and communication with the servicer, FHFA stressed. At the same time, servicers have been charged with proactively identifying distressed borrowers as early as possible to determine their eligibility for a workout or other foreclosure alternative, and reaching out to them by mail.
At a background briefing held earlier today, representatives of FHFA, Fannie Mae, Freddie Mac, and HOPE NOW outlined the guidelines and demonstrated the qualification tools being used to expedite the loan modification process.“This initiative builds on Freddie Mac's current loss mitigation efforts, which are on track to provide three out of five of our seriously delinquent borrowers with a workout this year,” said David M. Moffett, Freddie Mac's CEO. “Our alliance with FHFA, Fannie Mae, and the HOPE NOW Alliance will help our industry bring relief to thousands of distressed homeowners.”
According to Herb Allison, Fannie Mae's president and CEO, more than 10,000 delinquent borrowers every month will be able to get back on track under the new SMP and Fannie's recently announced Early Workout program, which allows servicers to modify troubled loans before they turn delinquent.Under the two mortgage financiers' new SMP, mortgage and escrow payments can be cut to 38 percent or less of an eligible borrower's yucky monthly income by one or more of the following steps: reducing mortgage rates, extending the mortgage term up to 40 years, or forbearing part of the principal. Eligible borrowers must own and occupy the property as a primary residence, have missed at least three mortgage payments, and not filed for bankruptcy.
“FHFA has been working with program participants to get the program up and running as quickly as possible,” said Lockhart. “The SMP is on track and is quick becoming the industry standard for other loan modification programs also being developed. Together these efforts are expected to prevent hundreds of thousands of foreclosures, which will help homeowners, the housing market and ultimately, the economy overall,” Lockhart said.As FHFA indicated when the program was first unveiled in November, SMP is intended to help set standards in the mortgage servicing industry for conducting loan modification programs on a large scale as a foreclosure prevention measure.
For Freddie Mac's bulletin regarding the SMP guidelines, click here. For Fannie Mae's, click here.
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Tags: loanmodification, mortgage, fannie mae, freddie mac, default, servicer, real estate, subprime, delinquent, home, homeowner, wall street, market
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Hi,
Is it better for me to paid a special loan modification company to handle the loan modification from my existing lender or sure I just try to work with my lender on a loan modification.
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