Under the direction of the Federal Housing Finance Agency (FHFA), mortgage giants Freddie Mac and Fannie Mae developed the Flex Modification Foreclosure Prevention Program, a mortgage initiative that replaces the Home Affordable Modification Program(HAMP®) which is set to expire at the later part of 2017.
The new program, announced by both Freddie Mac and Fannie Mae on December 14, aims to “help America’s families by offering significant reductions in their monthly mortgage payments.” The Flex Modification integrates inputs from earlier programs as well as insights from an extensive resource of industry contributors. The new foreclosure program is expected to help eligible homeowners reduce their monthly mortgagepayments by 20 percent.
When is it effective?
The current HAMP® will expire on December 30 of this year. In the interim, servicers must continue to evaluate borrowers for Standard and Streamlined Modifications following the evaluation hierarchy. Services will start to implement the new program on October 1, 2017.
Who are eligible?
The Flex Modification Foreclosure Prevention Program will apply to all mortgage loan delinquencies. Most of those borrowers who are already at least 60 days delinquent would be eligible. It could “also be an option for those who are current or less than 60 days delinquent in certain situations,” according to separately-released reports from Fannie and Freddie.
Additional payment relief is also contemplated to allow the forbearance of the loan principal:
- If you are delinquent for less than 90 days, you are required to complete a loss mitigation application in order to get a 20 percent principal + interest payment reduction, AND a 40 percent post-modification housing expense-to-income ratio.
- If you have been delinquent for 90 days or more, the program aims to give you a 20 percent reduction in payment without the need for a borrower documentation.
A white paper published in July 2016 under the joint cooperation of the U.S. Department of the Treasury, the HUD and the FHFA shaped the program. In this paper titled Guiding Principles for the Future of Loss Mitigation, they lay out five factors — accessibility, affordability, accountability, sustainability and transparency — which formed the foundation of a future loss mitigation program.