In an effort to help its borrowers and loan servicers, Fannie Mae recently announced a series of actions to stop foreclosure.
The move by government-seized Fannie Mae (Federal National Mortgage Association) is part of the streamlined loan modification program for homeowners who are three full payments behind on their mortgage and are headed for foreclosure.
The adjusted program now has the following features to help distressed homeowners deal with their foreclosure problems:
Prevention. Loan servicers can now start using Fannie Mae’s foreclosure prevention tools even when a borrower has not defaulted yet. As soon as the need becomes apparent, and a missed payment becomes possible, servicers can use the prevention tools.
Early Workout program. Services can pre-negotiate a loan modification with a single document used for a trial period. The same document becomes a permanent agreement after some time. Before, homeowners facing foreclosure have to go through a more complicated process, signing a document for a trial period before signing another agreement to make the modification program permanent.
Double Maximum Forbearance. The maximum forbearance, or the period when payments are reduced or suspended, has been increased from six months to twelve. This option is available for borrowers who need a loan modification.
Loan Flexibility. Servicers can now remove loans from mortgage-backed securities pools as soon as the loan is one month behind for the purpose of loan adjustment. This option applies to loan backing securities issued on or after January 2009
Fannie Mae, and its brother company, Freddie Mac (Federal Home Loan Mortgage Association) guarantee or own about half of $11.5 trillion in U.S. outstanding home loan debt. After acquiring control of the two companies, government has been injecting each with up to 100 billion.
In return, the government gets ownership stakes of almost 80 percent. The current move by Fannie Mae hopes to finally address foreclosure problems amidst criticism that the government and lenders are not doing enough to help distressed homeowners.
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