DUE to obvious delays and failed attempted to help struggling homeowners, the two leading agencies Fannie Mae and Freddie Mac who owns or guarantee more than half of all US home loans have come up with a simplify loan modifications, many borrowers who become 90 days or more past due on mortgages will be offered lowered payments without having to prove hardship, the federal regulator of the home-finance giants said.
The streamlined modification program, to be put into effect in July, would reduce monthly payments by about 30% on average, officials said in announcing the program.
Eligible borrowers would receive letters explaining the modification offer and specifying the reduced payment. If they made three monthly payments during a trial modification period, the new loan terms would become permanent — without them having to document their financial situations.
The new program can cut monthly mortgage payments as much as other modification programs but does not require borrowers to submit documentation. They merely accept the streamlined offer by beginning to make trial payments. The modification becomes permanent, once the borrower demonstrates his or her ability to pay by completing the trial period.
Streamlined Modifications offer the same terms as the Standard Modification, which Freddie Mac announced in September 2011. Servicers can reduce the monthly payment through a combination of lowering interest rates, extending payment terms up to 40 years, and providing principal forbearance to some underwater homeowners. This has been in place and for me failed miserably due to the double edge sword type guideline they put in; you have to qualify for hardship to qualify for the loan as well. The qualifying ratios of 31 percent debt to income are far more stringent that a new buyers trying to get a new loan. So, how can you actually be in hardship but really make three times your mortgage monthly payments?
Tracy Mooney, Freddie Mac’s Senior Vice President, Servicing and REO, said, “We look forward to working with our servicers to implement the Streamlined Modification initiative, which underscores our commitment to keep more financially troubled borrowers in their homes. Freddie Mac has helped an estimated 2.6 million families avoid foreclosure through mortgage modifications or refinancing since the housing crisis began.”
In My opinion, that is a minute number that they successfully qualified or modified. We are in the last stages of this crisis, NOW they come out with signs of aggressiveness, a little to late the hero I would think. Nonetheless, if you have a Fannie Mae or Freddie Mac loan that is currently delinquent, you might get a letter of hope from your servicers. But I would start to initiate the process and not sit still and wait. Remember you don’t directly talk to Fannie and Freddie, your servicers should. Again, who are your servicers: BOA, Wells Fargo, Chase, Indymac to name a few of the bigger banks that are servicing loans for Fannie and Freddie.
Who can qualify? Homeowners must be delinquent by at least 90 days but no more than 24 months. The loans must be first mortgages, at least 12 months old, and be for 80% or more of the property value. Loans that have been modified two or more times previously are not eligible.
The modifications would cut the interest to half a percentage point above the going rate for conventional loans, which at present would result in a 4% rate. The repayment term would be extended to 40 years. And in some cases, borrowers would not be required to pay interest on a portion of the loan balance (Don’t hold your breath on this option).
The program does not alter DeMarco’s controversial refusal to allow reductions in the principal owed – a policy that has caused many advocates and government officials, including California Atty. Gen. Kamala Harris, to call for his ouster.
DeMarco has maintained that reducing principal would end up costing taxpayers money and could encourage additional defaults.
FHFA officials said they did not believe the new program would encourage a flood of so-called strategic defaults, in which borrowers who could afford to pay fall behind intentionally to get their loans modified. Fannie Mae and Freddie Mac have existing screening measures to prevent strategic defaulters from taking advantage of the program, the FHFA said.
So, if you are just defaulting now to jump into this new program, think twice about your chances of approval before you go and ruin your credit.
The housing market is surely showing signs of recovery. It is now officially a sellers’ market. With the lowest rates ever, sellers have the opportunity to sell for more because buyers can qualify for a larger loan amount due to a more affordable payment. So, if you are considering to move up to a better home or downsize to a more affordable home, or if you just want to get out of a larger debt please call Ken Go for a free consultation and I will actively asses your financial situation and truthfully suggest what I think would be best for you and your family.
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Please call Ken Go of 1st Innovative Finance at (562) 508-7048 for your RE financial needs and your loan modification or short sale questions. Or you can write to: [email protected]. Thanks.
