The Federal Housing Finance Agency announced this week that it will now allow mortgage finance companies Fannie Mae and Freddie Mac to roll back one of the cumbersome rules in the mortgage modification process.
The new guidelines will no longer require homeowners to provide proof of “financial hardship” if they are at least 90 days behind on their mortgage payments.
“Our goal is to give homeowners an efficient way to avoid foreclosure and remain in their home,” said Leslie Peeler, Fannie Mae senior vice president in a statement. “This streamline modification initiative will cut through the paperwork and simplify the process of securing a permanent mortgage modification for struggling borrowers.”
And FHFA acting director Edward DeMarco added,
“This new option 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.”
Fannie and Freddie currently guarantee about two-thirds of all new U.S mortgages, but only 3.3 percent of their portfolio is considered “seriously delinquent.” Officials did not say how many more homeowners might be aided by this softening of the rules.
Those who participate in the mortgage modification process will receive help in the form of lowered interest rates or longer loan terms, but the FHFA has not authorized Fannie and Freddie to make principal reductions. Both companies were taken over by the government in 2008 when they were on the brink of failure and have relied on billions of dollars of taxpayer funds since then to stay afloat. Because of this, DeMarco has been very wary of any moves that would create further losses for the companies.
The new rule will be effect between July1, 2013 and August 1, 2015.