Beginning July 1, borrowers who are at least 90 days delinquent on a Fannie Mae- or Freddie Mac-guaranteed mortgage will be allowed to lower their monthly payments and modify their mortgage without having to fill out financial or hardship documentation.
Fannie Mae and Freddie Mac guarantee about half of U.S. home mortgages.
Most foreclosure avoidance programs, including the federal government’s Home Affordable Modification Program (HAMP), make you fill out financial forms documenting your income, expenses, and employment. Troubled borrowers say their lenders often lose that paperwork, while lenders often claim borrowers aren’t completing the paperwork.
The new Streamlined Modification Initiative program would also:
- Lower your interest rate close to current rates.
- Stretch out your mortgage to 40 years.
If you owe more than your home is worth, you also won’t have to pay interest on as much as 30% of your outstanding mortgage amount.
Once you’re in the program, you’ll then have to make three on-time trial payments at the new rate. Do that and your mortgage will be permanently lowered under the new Streamlined Modification initiative.
If you opt for the program, you’ll be encouraged to document your income and financial hardship. That’s because the traditional foreclosure avoidance programs will likely net you a better deal.
The program, which expires Aug. 1, 2015, is open only to home owners with loans owned or guaranteed by Fannie Mae or Freddie Mac.
If you qualify for the program, your lender must offer it to you. If you think you qualify and aren’t automatically offered the program, you can call your lender to ask about the program after July 2013.
- You must be at least 90 days delinquent, but no more than 24 months delinquent.
- Your mortgage loan amount divided by the current value of the property must be greater than or equal to 80%.
- Your mortgage loan has to be a first mortgage.
- You can’t have been 60 days late on a prior loan modification payment, or have failed at two or more prior modification plans.
- You must have gotten your loan more than a year ago.