More mortgage borrowers facing longer-term hardships will be able to achieve meaningful payment reductions as a result of recent enhancements to Fannie Mae and Freddie Mac’s Flex Modification policies.
Fannie Mae and Freddie Mac have completed more than half a million modifications through their Flex Modification offerings since they were implemented in 2017, according to the Federal Housing Finance Agency, regulator of Fannie and Freddie. These offerings have helped struggling borrowers throughout the country.
“The Flex Modification enhancements will support sustainable homeownership by allowing more eligible borrowers facing hardships to remain in their homes by achieving meaningful mortgage payment reduction in the current environment of elevated interest rates and home prices,” says Sandra L. Thompson, director of the FHFA, in a release.
Flex Modification is the enterprises’ loan modification offering that provides a home retention solution for eligible borrowers facing a permanent hardship who can no longer afford to make their regular monthly mortgage payments.
The newly enhanced Flex Modification policies lower a borrower’s monthly payment by reducing the borrower’s interest rate (if eligible); extends the mortgage term; and forbears principal for borrowers with mark-to-market loan-to-value ratios greater than 50%.
By incrementally applying these steps, borrowers will be able to achieve a 20% principal and interest (P&I) payment reduction, the FHFA says.
The enhanced Flex Modification policies will become effective on December 1, 2024.
Photo: Karsten Winegeart