WASHINGTON (3/28/13)--Starting July 1, homeowners will have a new foreclosure prevention option through Fannie Mae and Freddie Mac, the Federal Housing Finance Agency (FHFA) announced Wednesday.
To take part in the new program, known as the Streamlined Modification Initiative, the FHFA said homeowners must:
- Be between nine and 24 months behind on their mortgage payments;
- Have owned their home for at least one year, and
- Have a mortgage loan-to-value ratio equal to or greater than 80%.
Loans that have been modified at least two times previously will not be eligible for the program, the FHFA added.
Under the program, many homeowners that are at least 90 days delinquent will be sent a streamlined modification solicitation offer by their mortgage servicer. The FHFA said this offer will include a trial period plan which:
- Specifies the dollar amount of the new mortgage payment based upon a fixed interest rate;
- Extends the mortgage payment terms to 40 years; and
- Provides principal forbearance for certain underwater borrowers.
Mortgage holders that make three on-time payments during this trial period will then be able to permanently modify their mortgages. Borrowers will not be required to document their hardship or financial situations to take part in this modification program, the FHFA said.
The program is scheduled to run until August 1, 2015.
FHFA Acting Director Edward DeMarco said this program 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," he added.
Foreclosure starts in the fourth quarter of 2012 fell to the lowest level seen since the third quarter of 2008, the FHFA noted in a separate release. More than 130,300 foreclosure prevention actions were taken during the fourth quarter of 2012, and the FHFA reported the number of delinquent mortgages held by Fannie Mae and Freddie Mac declined 14% in 2012. Mortgage delinquencies dropped in nearly every state, excluding New Jersey and New York, the FHFA added.
For more on the FHFA program and the 2012 fourth quarter mortgage data use the resource links.