Friday, April 29, 2016

New Principal Reduction Modification Program for Underwater Borrowers

Are you seriously delinquent on your mortgage and at risk of foreclosure? According to a recent press release from the Federal Housing Finance Agency (FHFA), Fannie Mae and Freddie Mac will offer a new Principal Reduction Modification program for “certain seriously delinquent, underwater borrowers who are still struggling in the aftermath of the financial crisis.” It is the hope that this new program will allow these homeowners to stay in their houses and to avoid foreclosure.
Terms of the New Modification Program
What will the new Principal Reduction Modification program entail? First, it is important for borrowers to recognize that it is a one-time offer. And it is only good for current mortgage holders with a loan that is “owned or guaranteed by Fannie Mae or Freddie Mac.” But those are not the only eligibility criteria. To be eligible, homeowners will also need to fall within the following categories:
  • Must be owner-occupant borrowers (in other words, the homeowners must actually be living in the house and using it as a residence, rather than renting it out, for instance, to a tenant);
  • Must be delinquent on their mortgage by 90 days or more as of March 1, 2016;
  • Must have a mortgage with an outstanding unpaid principal that is $250,000 or less; and
  • Must have mark-to-market loan-to-value (MTMLTV) ratio that exceeds 115 percent.
Most of these terms should be relatively easier for borrowers to understand. But what is an MTMLTV ratio? According to an article in HousingWire, the MTMLTV ratio is “the gross unpaid principal balance of the mortgage, including any principal forbearance amount, if applicable, divided by the property value obtained.”
Other Key Items to Note About the New Offering
According to the FHFA’s fact sheet for the Principal Reduction Modification program, the following represent some key facts surrounding the decision to develop the program, as well as some more information about the borrowers it is most likely to help:
  • The FHFA expects around 33,000 borrowers to be eligible for the new program.
  • The program is designed to provide borrowers who are seriously delinquent on their mortgages a “last opportunity to avoid foreclosure while also addressing negative equity remaining from the financial crisis.”
  • Over the last four years, the total number of underwater homeowners who currently have loans owned or guaranteed by Fannie or Freddie has declined by approximately 80 percent.
  • Only around 2% of currently underwater loans would fall under the category of those that are “seriously delinquent” and are owned or guaranteed by Fannie or Freddie.
  • Around half of all loan modifications currently include some form of principal reduction.
Borrowers who are eligible for the new program must receive a solicitation letter by October 15, 2016.
Contact an Oak Park Foreclosure Defense Lawyer
Despite the fact that much of the housing market has recovered from the financial crisis, there are still many families in Illinois who have not been able to get back on their feet over the last five years or more. Programs like the one recently announced by the FHFA are intended to help struggling homeowners, but it is also important to seek advice from an experienced Oak Park foreclosure defense lawyer. Contact the Emerson Law Firm today for more information.
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1 comment:

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