Fannie Mae and Freddie Mac in January, 2017 will begin a program to aid homeowners who are behind on their mortgage payments, the companies announced December 14, 2016.
The Flex Modification loan program replaces a the HAMP foreclosure-prevention policy that's set to expire at the end of this year. HAMP was enacted to help distressed homeowner due to the mortgage crisis that started in 2007-2008. Loan servicers have until October, 2017 to start the program.
The new loan modification guidelines are expected to increase the population
of homeowners eligible for lower monthly payments, short sales and other
alternatives to foreclosure, according to Fannie Mae.
"We believe the program is flexible to adjust for regional and even
local differences in housing," said Bill Cleary, vice president of Fannie
Mae's single-family servicing policy. "It provides the greatest amount of
assistance to those areas in need." HAMP, was adopted
in 2008 as millions of homeowners fell behind on their payments. Over time,
more than 1 million trial mortgage modifications were started . Many
ended in new defaults, but eight years after the collapse, nearly 360,000
borrowers are still in the program and continue to make payments on their modified
loans, according to the Federal Housing Finance Agency. The statistics show the higher percentage of successful modification involved the ones that decreased monthly mortgage payments the most.
The goal, with HAMP
and its replacement, is to prevent foreclosures and preserve homeownership and limit losses to taxpayers,
which stand behind the mortgages guaranteed by Fannie and Freddie. In general the costs to modify a loan are less than to foreclose one and take possession of delinquent
"By avoiding the high costs associated with foreclosures, the Flex
Modification will result in significant savings for the Enterprises and
taxpayers," FHFA Deputy Director Sandra Thompson said in a written
statement. "And it will provide borrowers who face permanent hardships
with a sustainable modification." This is good news for both borrowners, lenders and taxpayers that meaningful mortgage modifications will still be an option after Decemeber 31, 2016.