WASHINGTON, March 27 The top U.S. housing
regulator on Wednesday said it will simplify an existing
anti-foreclosure program to make it easier for struggling
homeowners to lower monthly payments.
The mortgage modification program is open to borrowers with
loans backed by Fannie Mae and Freddie Mac.
While the two government-controlled firms finance about
two-thirds of all new U.S. mortgages, they represent a far lower
portion of delinquent mortgages.
The Federal Housing Finance Agency said the companies will
no longer require documents on personal finances or paper work
that records financial hardship under the program in which they
target loans that are at least 90 days delinquent and have high
"This new option gives delinquent borrowers another path to
avoid foreclosure," said FHFA Acting Director Edward DeMarco in
a statement. "We will still encourage such borrowers to provide
documentation to support other modification options that would
likely result in additional borrower savings."
No estimate of how many homeowners would be able to qualify
was immediately provided by officials. Fannie Mae and Freddie
Mac have completed 1.3 million loan modifications since they
were seized by the government in 2008, according to the FHFA.
Fannie Mae and Freddie Mac are paying mortgage servicers to
process each modification. The companies will absorb the losses
on loans or mortgage securities they own.
Officials said the initiative aims to encourage servicers to
resolve delinquencies earlier, help keep more borrowers in their
homes, and minimize losses to Fannie Mae and Freddie Mac which
rely on taxpayer support.
Under the streamlined modification program, mortgage
servicers work with borrowers to reduce monthly payments, by
reducing interest rates, extending the length of the loan term,
or providing principal forbearance, which postpones the
repayment of a portion of a loan balance, but doesn't
permanently reduce it, for certain underwater borrowers.
Homeowners who qualify must go through a trial period. Their
loan modifications won't become final until they have made three
The new modification initiative takes effect on July 1 and
will last until the program ends on August 1, 2015.
The Obama administration has placed pressure on the
regulator to be flexible with struggling homeowners. Fannie Mae
and Freddie Mac are blocked by their regulator from implementing
principal forgiveness, arguing that doing so is too costly
relative to other types of modifications.
DeMarco, resisting more-aggressive housing rescues, has
acknowledged that trimming balances for underwater homeowners
could save Fannie Mae and Freddie Mac money. However, those
savings are not enough to overcome other hidden costs of such a
program. This includes the possibility homeowners who are
current on payments would chose to default strategically to
qualify for relief.