A new program known as the Streamlined Modification Initiative, being rolled out by the Federal Housing Finance Agency (FHFA), is meant to make it easy for borrowers whose mortgages have become unaffordable to restructure their loans so that monthly payments will be reduced substantially. In order to qualify for this program, borrows must meet several requirements, including:
- Their mortgages must be backed by Fannie Mae or Freddie Mac
- They must be at least 3, but no more than 24 months behind on their mortgage payments
- Their mortgages must be at least one year old
- The principal balance on the mortgage must be equal to 80% or more of the value of the home
The monthly payments will be reduced through a combination of lowering interest rates and extending the length of the mortgage; the principal owed on the loan will not be altered.
According to CNN Money, the beauty of the Streamlined Modification Initiative is that it avoids some of the pitfalls of previous home loan modification programs the government has sponsored. The paperwork nightmares faced by borrowers seeking to reduce their monthly mortgage payments using past programs won’t occur with this one because people who meet the criteria will be automatically enlisted for a 3-month trial. Assuming the borrower makes the modified payments, they will be permanently enrolled.
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Government officials and real estate experts are hopeful that this new, easy-to-use home loan modification plan will keep thousands of borrowers in homes they would have otherwise lost to foreclosure. This benefits not only the person carrying the loan, but the housing market overall.
What do you think of this new program?