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Streamlined Loan Modifications - Will It Help?

mycmps | 09 December, 2008 00:06

The Federal Housing Finance Agency (FHFA) announced on Tuesday, November 11, 2008, that a major program designed to simplify and streamline loan modifications for struggling homeowners to prevent foreclosures had been established. The collaboration between Fannie Mae (FNM), Freddie Mac (FRM), Federal Home Loan Banks, HOPE NOW (and it’s 27 service partners), Department of Treasury, Federal Housing Administration and FHFA would be implemented by December 15th.

Who will be eligible?

Occupied Primary Residences ONLY
Three or more missed payments (90 day late)
Has NOT Filed for Bankruptcy
Loan is FNM, FRM or Portfolio with Participating Investors
Certify economic hardship/change in financial circumstances
DID NOT Purposely Default to Obtain Modification

The primary objective of the new program is to make mortgage payments affordable to those who can qualify. The allowable housing debt ratio for the program is 38%. This can be achieved by the reduction in interest rate, extending the term (30 years to 40 years) and restructuring the principle balance payment structure…or any combination.

It must be noted that the main difference between the new program and the HOPE for Homeownership provision in the Home Economic Recovery Act 2008 is that it is not intended for principal balances to be forgiven. This should be more appealing to lenders; however, less incentive to homeowners that have negative equity.

Therefore, who will really benefit from the streamline modification program?

CLICK HERE to see the FHFA announcement in it’s entirety.