Starting July 1, Fannie Mae and Freddie Mac servicers will lift loan modification barriers by offering eligible borrowers reduced payments without asking for financial or hardship documentation.
Through the FHFA’s Streamlined Modification Initiative, eligible borrowers who are 90 days to 24 months past due will receive a solicitation offer with a trial period plan that lasts for three months.
The offer will include a dollar amount for a new mortgage. The offer is based on a fixed interest rate and extends the loan payment term to 40 years. The initiative also provides principal forbearance for certain borrowers who are underwater.
“The Streamlined Modification Initiative adds to the suite of home retention tools offered by Fannie Mae and Freddie Mac,” said FHFA Acting Director Edward J. 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.”
In order to be eligible, a loan must be owned or guaranteed by Fannie Mae or Freddie Mac and be a first-lien mortgage that is at least 12 months old with a loan-to-value ratio equal to or greater than 80 percent. Delinquent borrowers with second homes or investment properties can also qualify for the initiative.
Unlike the Home Affordable Modification Program (HAMP), borrowers can bypass the process of documenting their financial situation.
The initiative ends August 1, 2015. More information can be found in Fannie Mae and Freddie Mac’s servicing guide announcements.
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