Fannie Mae and Freddie Mac will offer a new, simplified loan modification program to help troubled borrowers avoid foreclosure and stay in their homes.
Beginning July 1, borrowers who are at least 90 days delinquent on a Fannie Mae- or Freddie Mac-guaranteed mortgage will be allowed to lower their monthly payments and modify their mortgage without having to fill out financial or hardship documentation.
Fannie Mae and Freddie Mac guarantee about half of U.S. home mortgages.
Most foreclosure avoidance programs, including the federal governmentâ€™s Home Affordable Modification Program (HAMP), make you fill out financial forms documenting your income, expenses, and employment. Troubled borrowers say their lenders often lose that paperwork, while lenders often claim borrowers arenâ€™t completing the paperwork.
The new Streamlined Modification Initiative program would also:
Those two changes will reduce the typical program participantâ€™s monthly payment by about 30%.
If you owe more than your home is worth, you also wonâ€™t have to pay interest on as much as 30% of your outstanding mortgage amount.
Once youâ€™re in the program, youâ€™ll then have to make three on-time trial payments at the new rate. Do that and your mortgage will be permanently lowered under the new Streamlined Modification initiative.
If you opt for the program, youâ€™ll be encouraged to document your income and financial hardship. Thatâ€™s because the traditional foreclosure avoidance programs will likely net you a better deal.
The program, which expires Aug. 1, 2015, is open only to home owners with loans owned or guaranteed by Fannie Mae or Freddie Mac.
If you qualify for the program, your lender must offer it to you. If you think you qualify and arenâ€™t automatically offered the program, you can call your lender to ask about the program after July 2013.
To see if your mortgage is backed by Fannie or Freddie, go HERE