New Fannie Mae and Freddie Mac Loan Modification Guidelines for July 1, 2013

If you're still an "underwater" homeowner of a single family residence, a condominium, a second

Did you buy when the market was high?

home, or an investment property with a mortgage owned or guaranteed by Fannie Mae or Freddie Mac, you might be eligible for sweeping new changes as of July 1, 2013, known as the "Streamlined Modification Initiative."

Past programs for helping borrowers modify their loans met with less success than hoped for, and Fannie Mae/Freddie Mac are now offering eligible borrowers the opportunity for less documentation and document collection which also removes administrative issues for the lender.  Under this new program, borrowers are not required to document their hardship or financial situations.

This program ends August 1, 2015, so it's basically in effect for 2 years.

What are the borrower eligibility requirements?

• The loan must be owned or guaranteed by Fannie Mae or Freddie Mac.
• Homeowners must be 90 days to 24 months delinquent.
• There must be a first-lien mortgage that is at least 12 months old with a loan-to-value ratio equal to or greater than 80 percent.
• Loans that have been modified at least two times previously are not eligible.
• The borrower must participate in a trial payment plan period of 3 months.

Loan servicers, i.e, Bank of America, Wells Fargo, Chase, or whomever handles your loan payments, will be required to send a Streamlined Modification Solicitation Offer to borrowers who are at least 90 days delinquent and meet the initiative’s eligibility requirements.  The HAMP program (Home Affordable Modification Program) is still available to borrowers, and may offer more favorable payment options to the borrower, however it also requires borrowers to meet certain guidelines and submit full documentation. 

If you are considering selling, and are not yet 90 days delinquent on your loan, you should carefully consider your plan of action.  The proposed monthly payment may or may not be satisfactory to you under this Streamline program, and as a seller, you would ideally have a very clear picture in your mind as to the direction you are going to take.  Borrowers should be aware that "strategic defaulters" will be screened for in advance, so if someone is purposely defaulting in order to obtain this program, Fannie Mae and Freddie Mac will be on the lookout for that.

Interestingly, some property owners are not aware of current selling prices in their local market, so obtaining a good market valuation on your property should be a first priority. If your property is a candidate for a non-short sale transaction, you could move on. If on the other hand, you would rather stay put and not sell if you obtained a better mortgage payment, you should find that out as soon as possible to avoid being an unmotivated seller at this time.

For more details about this program, or to find out if you have a Fannie or Freddie mortgage, please contact me via e-mail or phone, I will welcome the opportunity to help you. I serve the Long Beach, Lakewood, Cerritos, Cypress, Seal Beach, Los Alamitos, and San Pedro areas, including adjacent cities such as Huntington Beach.