It looks like Fannie Mae is finally implementing stronger loan modification methods and starting to progress with the foreclosure prevention times by implementing their new “Stream Lined Loan Modification Program” or (SMP).
What does this mean “only” to Fannie Mae borrowers?
Key changes are that Fannie Mae mortgage servicers will now have “some” flexibility of offering a loan modification after a mortgage is one month delinquent as opposed to the previous agreement that did not allow for removal until a loan is 120 days delinquent.
Fannie also has provided mortgage servicers with new guidance into place that instructs them to provide foreclosure prevention assistance as soon as a borrower demonstrates the need for help.
These steps are the latest in a series of recent actions Fannie Mae has taken to help minimize home foreclosures. Fannie Mae is working with the Federal Housing Finance Agency and 27 lenders and servicers in the HOPE NOW alliance to launch SMP by December 15. Additionally, the company has directed servicers to suspend foreclosure sales and the completion of evictions on occupied single-family properties through January 9, 2009.
Fannie Mae said the actions are designed to build on and complement the recently announced streamlined loan modification program (SMP) that targets borrowers who have missed three full payments and meet certain other criteria. The steps announced today are meant to reach borrowers earlier with foreclosure prevention options, and include:
- Specific direction to servicers to provide foreclosure prevention assistance as soon as a borrower demonstrates the need for help — even if a borrower is current but default is reasonably foreseeable.
- Fannie Mae’s new Early Workout program allowing servicers, in one step, to pre-negotiate a loan modification that becomes effective and permanent only after an initial trial period. The Early Workout process can begin as soon as a borrower demonstrates the need for a modification — even if a borrower is current but a default is reasonably foreseeable.
- Doubling of the maximum forbearance and repayment plan periods for most loans to borrowers in need of loan workouts.
- A new 2009 Single-Family Master Trust Agreement and servicer guidance that give Fannie Mae servicers the flexibility to remove a loan from an MBS pool once the loan is one month delinquent for the purpose of a loan modification. This applies only to loans backing securities issued on or after January 1, 2009. Trust agreements for pools issued before that date do not allow for this flexibility, but as described above, Early Workout gives servicers the tools necessary to address problem loans as early as necessary, regardless of MBS pool date.