Fannie Mae and Freddie Mac Will Finally Offer Loan Modifications with Principal Reductions
After years of refusing to do principal reductions in homeowners’ loan modifications, Fannie Mae and Freddie Mac have finally relented, announcing a new program under which they will provide principal reductions if homeowners meet certain criteria.
To qualify for a potential principal reduction, a homeowner must be more than 90 days behind on their mortgage as of March 1, 2016, they must owe at least 115% more than the fair market property value, and the principal balance cannot be higher than $250,000, exclusive of arrears. Homeowners who become delinquent on their mortgages after March 1, 2016 are not eligible.
These loan modifications will capitalize additional mortgage arrears, reduce the interest rate, and extend the term of the loan to 40 years in most cases. Homeowners will first enter into a three-month trial loan modification. If they make all their payments on time, they will be given a permanent loan modification with the principal reduction.
The program is called the Principal Reduction Modification. The Federal Housing Finance Agency has issued a Fact Sheet providing more information about the loan modification program.
If you are behind on your mortgage and you meet the above criteria, your mortgage servicer must solicit you for a loan modification by July 16, 2016 in order to review your mortgage for a principal reduction and loan modification.
Further information is available here: Fannie Mae and Freddie Mac Principal Reduction Loan Modification Program Press Release
Our office has helped many homeowners – people whose loans are owned by Fannie Mae, Freddie Mac, and even so-called private investors – to obtain loan modifications, and to obtain relief from their mortgage servicers. Contact us for a no-cost case evaluation to see if we can help you.