Mortgage servicers rejoice! The Home Affordable Modification Program (HAMP), which is sunsetting on Dec. 31, will be reborn as a new program next year.
The new but very similar Flex Modification foreclosure prevention program introduced today by Fannie Mae and Freddie Mac is “designed to help America’s families by offering reductions to their monthly mortgage payments,” the companies say in separate announcements.
“The new Flex Modification announced by Fannie Mae and Freddie Mac today was designed based on lessons learned from crisis-era loan modification programs to help borrowers stay in their homes and avoid foreclosures whenever possible,” says Sandra Thompson, deputy director of the Federal Housing Finance Agency, in a statement. “The Flex Modification also reflects input received over the course of extensive engagement with lenders, mortgage insurers, consumer advocates, and other stakeholders. By avoiding the high costs associated with foreclosures, the Flex Modification will result in significant savings for the Enterprises and taxpayers. And it will provide borrowers who face permanent hardships with a sustainable modification.”
The program includes components of HAMP as well as Fannie and Freddie’s standard and streamlined modification programs. It is expected to provide a 20% payment reduction for eligible borrowers. A high percentage of those who are at least 60 days delinquent would be eligible; the modification could also be an option for those who are current or less than 60 days delinquent in certain situations, the companies say.
Although the Mortgage Bankers Association introduced its own proposed replacement for HAMP several months ago, it is unclear whether any unique elements of that particular proposal are included in this new program.
According to the GSEs, the “program was shaped by a white paper published in July 2016 by the U.S. Department of the Treasury in conjunction with the U.S. Department of Housing and Urban Development (HUD) and FHFA titled Guiding Principles for the Future of Loss Mitigation. It laid out five factors – accessibility, affordability, accountability, sustainability, and transparency – that should form the foundation of future loss mitigation programs.”
“The Flex Modification is an adaptive program that will allow us to continue to assist struggling homeowners in a changing housing environment and simplify the process for servicers to deliver those solutions,” says d Bill Cleary, vice president of single-family servicing policy, Fannie Mae. “We believe the program is flexible to adjust for regional and even local differences in housing. It provides the greatest amount of assistance to those areas in need.”
The new program will replace the GSEs’ current modification offerings on and after October 1, 2017. In the interim, servicers must continue to evaluate borrowers for standard and streamlined modifications following the evaluation hierarchy.
“We’re proud to announce the Flex Modification program, a carefully considered and transparent alternative for homeowners who want to avoid foreclosure in today’s post-crisis mortgage environment,” says David Lowman, executive vice president of Freddie Mac’s single-family business. “We believe it strikes the appropriate balance between borrower relief and economic responsibility.”