The Federal Housing Finance Agency has recently announced that it came up with a solution to address the problem that struggling loan borrowers are facing. According to FHFA, the new program will help consumers avoid foreclosure. This new offering is made available through Freddie Mac and Fannie Mae – the two companies that back more than 50 percent of the whole home loans in the U.S.
The program is designed for borrowers who are facing 90-day delinquency in their mortgages. The modification of loans will allow them to lower their monthly payments to an average of 30 percent starting July. What makes this program beneficial is that borrowers don’t have to prove their financial hardships.
Freddie Mac and Fannie Mae Guarantee Lower Monthly Loans Payment
Freddie Mac and Fannie Mae help borrowers pay their mortgages . These two giants offer services to collect payments, settle foreclosures and provide options for consumers who are having troubles with bad credit loans. Among the firm’s biggest programs is to educate borrowers and encourage them to find other means to avoid losing their homes and properties.
Under the new program, Freddie Mac and Fannie Mae will send eligible borrowers a letter that contains all the requirements they have to comply with, along with a thorough explanation of how this new loans program will work. If borrowers follow the letter down to the T, then it could mean the reduction of their monthly loan payment.
Basically, borrowers have to undergo a three-month trial period, where they have to pay discounted loans . If they successfully complete the trial period, they would enjoy the lower monthly payments permanently and without the tedious process of having to submit a detailed explanation of their current financial situations.
In order to qualify for the program, the borrower should have acquired the home loans as their first mortgages. Additionally, the loans must be 12 months old with a 90-day delinquency, but not over 24 months. Unfortunately, those that have secured other modifications on their mortgages twice or more are no longer qualified. Additionally, it should be applied to the 80 percent or higher of the property value.
The new program does not only help struggling borrowers enjoy lower and more affordable monthly payments on their loans; it also leads to the significant reductions of the interest rates. Moreover, it will extend the repayment period for as long as 40 years. Depending on the borrowers’ loan status, they may also be free from paying hefty interest rates on some parts of remaining loan amount.
The Controversies behind the New Program for Loans Modification
One controversy being issued against this loans program is the possibility of strategic defaults. This means borrowers who do not have any troubles paying their loans would take advantage of the modifications as well. FHFA says that the lending giants would employ stringent screening measures to ensure this would never happen.
Furthermore, economy analysts are questioning as to whether or not this new program could actually help or injure the U.S. housing market that is now gaining momentum.