Fannie & Freddie Easing Loan Modification Rules

by admin ~ February 26th, 2009.

In a recent Bloomberg article, Dawn Kopecki wrote about Fannie Mae and Freddie Mac need to relax rules for a loan-modification program that promised to cut mortgage interest rates and lengthen amortization schedules for troubled borrowers, the chief economist for the companies’ regulator said.  Fannie Mae and Freddie Mac have sent 90,000 letters to borrowers who have missed at least three payments, inviting them to participate in the so-called streamlined loan modification program, since the plan was announced in November.  “Early indications are that several of the program guidelines should be liberalized to reach a broader population and to create a lower, more affordable payment,” Patrick Lawler, the chief economist of the Federal Housing Finance Agency, said in written testimony today in Washington to a House Financial Services Committee panel on housing.

 

The foreclosure prevention program is separate from an initiative proposed by President Barack Obama last week to have Fannie and Freddie refinance or modify more home loans.  The existing loan modification program is designed to reduce a borrower’s monthly payment to 38% of salary by reducing interest rates, extending repayment terms and, in some cases, reducing the outstanding principal. Joseph Evers, deputy comptroller at the Office of the Comptroller of the Currency, told lawmakers today that roughly 57% of Fannie and Freddie’s mortgage modifications made in the first quarter of last year defaulted again within six months of the home loan modification.

 

Washington-based Fannie Mae and McLean, Virginia-based Freddie Mac own or guarantee about $5.3 trillion of the $12 trillion in U.S. residential mortgage debt. The government seized control of the companies in September after their losses threatened to further disrupt the housing market, and regulators then began pushing them to step up efforts to stem home foreclosures.

 

Representative Maxine Waters of California, a Democrat and chairwoman of the housing subcommittee, said companies that collect payments, deal with delinquencies and provide other services for overseeing loans aren’t working hard enough to prevent foreclosures.  “I have experienced firsthand the challenges faced by borrowers who want to stay in their homes and who want to get current on their mortgages, but they either can’t get their servicer to pick up the phone or they get wrong, misleading or unapproved information,” Waters said.

 

Mortgage executives from JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. also testified.  Molly Sheehan, a senior vice president for JPMorgan’s home lending business told the panel that the unit has averted 330,000 foreclosures through loan modifications, repayment plans and other means. The business has hired 300 new loan counselors, opened 13 homeownership centers in regions with high default rates, and expects to prevent a total of 650,000 foreclosures on $110 billion of loans by the end of 2010, she said.  Read the complete article>

 

Category: Foreclosure news, Mortgage News, Published Loan Relief Articles, foreclosure prevention | Tags: , , , , ,

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