The Federal Housing Finance Agency (FHFA) has announced that Fannie Mae and Freddie Mac will offer a new, simplified loan modification initiative to minimize losses and help troubled borrowers avoid foreclosure and stay in their homes.
Beginning July 1, servicers will be required to offer eligible borrowers who are at least 90 days delinquent on their mortgages an easy way to lower their monthly payments and modify their mortgages without requiring financial or hardship documentation.
The new Streamlined Modification Initiative eliminates the administrative barriers associated with document collection and evaluation. Eligible borrowers must demonstrate a willingness and ability to pay by making three on-time trial payments, after which the mortgages will be permanently modified. Homeowners are encouraged to continue working with their servicers to evaluate all of their foreclosure prevention options. Documenting income and financial hardship could result in a modification with additional savings for borrowers.
‘The Streamlined Modification Initiative adds to the suite of home retention tools offered by Fannie Mae and Freddie Mac,’ says FHFA Acting Director Edward DeMarco. ‘This new option gives delinquent borrowers another path to avoid foreclosure. We will still encourage such borrowers to provide documentation to support other modification options that would likely result in additional borrower savings.’
The FHFA adds that the Streamlined Modification Initiative builds on the principles of the Servicing Alignment Initiative by encouraging servicers to resolve delinquencies earlier and in a more consistent and expeditious manner to keep more people in their homes and minimize losses to Fannie Mae, Freddie Mac and taxpayers. The program expires August 1, 2015.