Freddie Mac Makes New Simplified Mod Program Available Immediately

Freddie Mac is off to an early start in its offering of the new Streamlined Modification Program. The program was scheduled to take effect July 1 of this year, but the GSE says it is making the program immediately available to all eligible borrowers across the country.

As part of the program, Fannie Mae and Freddie Mac borrowers who are at least 90 days delinquent but no more than 720 days past due may be eligible for a modification that does not require the borrower to submit financial or hardship documentation.

The Federal Housing Finance Agency (FHFA), the GSEs’ conservator and regulator, first announced the program in late March.

The program requires servicers to send modification offers to all eligible borrowers. The solicitation letter will include details for a three-month trial period plan. In order for the modification to become permanent, the borrower must make on-time payments for the three-month trial plan to prove ability to pay.

“Today, Freddie Mac is giving a green light to its mortgage servicers to speed up financial relief for potentially thousands of families with delinquent mortgages across the nation. Now mortgage servicers can send eligible borrowers their Streamlined Modification trial period terms as soon as they are ready and borrowers can modify their loans by making the three trial period payments on time…Freddie Mac is focused on adding momentum to the housing recovery by giving distressed borrowers more options to avoid foreclosure,” Freddie Mac stated in a release.

To be eligible, the loan must also 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.

The streamlined modification program will provide borrowers with a 4% interest rate, extend mortgages to 40 years and provide principal forbearance on loans with a mark-to-market loan-to-value (MTMLTV) ratio of more than 115%, the report noted.

As of March 31, 2013, Fannie Mae has approximately 528,000 seriously delinquent loans and Freddie Mac has 397,000 for a total of 925,000 loans, the FBR report states.

These loans represent an unpaid principal balance of $83.5 billion at Fannie and $55 billion at Freddie for a total of $138.5 billion.

Additionally, a total of 74% of Fannie Mae’s seriously delinquent loans and 73% of Freddie Mac’s seriously delinquent loans are more than 180 days past due, almost all of which are more than one-year delinquent.

Meanwhile, this program provides incentive payments to servicers of $400 to $1,200 per successful modification, depending upon days delinquent.