Fannie Mae and Freddie Mac (the “Enterprises”) recently announced the new Flex Modification foreclosure prevention program (the “Flex Mod”), that will replace the Home Affordable Modification Program (“HAMP”), which expired December 30, 2016, and also will replace the Enterprises’ Standard and Streamline Modifications. The Flex Mod will be implemented by October 1, 2017, with the Enterprises’ Standard and Streamline Modifications remaining in effect in the interim.
The Flex Mod, developed jointly by the Enterprises at the direction of the Federal Housing Finance Agency, leverages components of crisis-era loan modification programs including HAMP and the Enterprises’ Standard and Streamline Modifications, and is designed to allow the Enterprises to continue to assist struggling homeowners in a changing housing environment and to simplify the modification process. The Flex Mod is intended to help more borrowers qualify for sustainable loan modifications and to avoid the high costs associated with foreclosures, resulting in potentially significant savings for the Enterprises and taxpayers.
The highlights of the Flex Mod program include, for instance, that it can be applied to mortgage loan delinquencies and also to mortgage loans that are determined to be in imminent default. The Flex Mod will offer additional payment relief, allowing forbearance of principal to an 80% mark-to-market loan-to-value ratio for eligible borrowers (not to exceed 30% of the unpaid principal balance) in two ways. For borrowers less than 90 days delinquent, the program requires a complete loss mitigation application and targets a 20% payment reduction and 40% housing expense-to-income ratio. For borrowers 90 or more days delinquent, the program targets a 20% payment reduction and requires no borrower documentation.
Fannie Mae’s announcement may be viewed here: http://www.fanniemae.com/portal/media/financial-news/2016/foreclosure-prevention-program-6496.html.
Freddie Mac’s announcement may be viewed here: http://freddiemac.mwnewsroom.com/press-releases/freddie-mac-announces-new-foreclosure-prevention-p-otcqb-fmcc-1290143.