How about some relief for Troubled Shareholders?
Mike SP
Fannie Mae and Freddie Mac, at the direction of the Federal Housing Finance Agency, on Wednesday announced enhancements to their flex modification policies. The updates, which go into effect no later than Dec. 1, target a 20% reduction in principal and interest payments for borrowers.
According to FHFA Director Sandra Thompson, the goal is to help borrowers suffering from the current climate of high interest rates and home prices remain in their homes. To achieve this, the modification process involves a waterfall of steps that servicers must follow until the mortgage payment is sufficiently reduced or all possible steps have been exhausted.
Those steps include the capitalization of all arrearages, the conversion of adjustable-rate mortgages to fixed-rate mortgages, a schedule of interest rate reductions and loan extensions up to 480 months.
In cases where the post-modification mark-to-market loan-to-value ratio exceeds 50%, principal forbearance may be applied until either P&I payments have been reduced by 20%, the mark-to-market loan-to-value ratio drops to 50% or the total principal forbearance reaches 30% of the loan’s unpaid principal balance.
No interest may accrue to the forborne principal.
For more details on the enhanced modification requirements, see the next issue of Inside The GSEs.