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Cash is king and when it comes to helping people in need, cash seems to light a fire under people’s arses to make them help a little bit more than they would if there were no cash incentives involved.
This is the “new” American way, right?
The facts are that it costs a servicer more money to perform some type of loan workout like a loan modification or short sale than it does to not provide assistance and workout mortgage problems with their borrower.
Yes, you heard it right. It costs them money to work with you and now you know why they offer so little help when you call in for relief.
Fannie Mae and Freddie Mac know this and they also are aware that they are dealing with some very unhelpful and greedy corporations in an industry known has the mortgage servicing industry. These mortgage giants have figured out that if they actually pay servicers to do loan modifications, loan workouts and short sales, they might increase the assistance to struggling borrowers that these companies are responsible for handling.
Incentive payments for repayment plans (where a borrower makes up the past-due payments over time) will be doubled to $400. Fannie Mae will begin an incentive payment of $700 for a loan modification where the terms of the loan are renegotiated. As an additional effort to help cash-strapped borrowers, Fannie Mae will prohibit servicers from assessing a modification fee to borrowers.
The recently announced HomeSaver Advance offers servicers a solution for borrowers experiencing a temporary financial hardship. HomeSaver Advance provides an advance to cover past-due mortgage payments in exchange for a separate, unsecured loan. The HomeSaver Advance incentive structure will be modified to pay servicers based on the performance of the mortgage loan, with an initial incentive of $200 and an additional $500 to be paid after the borrower makes three consecutive timely scheduled payments.
Incentive payments for short sales (pre-foreclosure sales) will range from $1,000 to $1,500 and payments for deeds-in-lieu of foreclosure will increase to $1,000.
Fannie Mae is working with lenders, loan servicing companies, and policy makers to respond to the housing and mortgage market crisis with a goal to minimize the impact on families and communities by helping to prevent foreclosures, supporting counseling efforts and providing greater market stability. For more information, go to fanniemae.com and select “Keys to Recovery Initiatives.”
