Beginning July 1, 2013, Fannie Mae and Freddie Mac will offer a new, simplified loan modification program to help troubled borrowers avoid foreclosure and stay in their homes. Read on to learn more about the “Streamlined Modification Initiative” and find out if you qualify for relief under this program.
The Streamlined Modification Initiative
On March 27, 2013, the Federal Housing Finance Agency (FHFA) announced the latest program designed to help borrowers save their homes. The Streamlined Modification Initiative provides an efficient, no-document way for certain delinquent borrowers to obtain a permanent loan modification.
Under the Streamlined Modification Initiative, mortgage servicers are required to send you a letter offering you a modification if you meet all of the following criteria:
- Your loan is owned or guaranteed by Fannie Mae or Freddie Mac.
- You are 90 days (3 months) to 720 days (24 months) delinquent on your mortgage.
- You have a first-lien mortgage that is at least 12 months old.
- Your loan-to-value ratio is equal to or greater than 80%.
Loans that have been previously modified two or more times are ineligible for the program. Strategic defaulters are also excluded. (According to the FHFA, Fannie Mae and Freddie Mac have existing screening measures to prevent strategic defaulters from taking advantage of the program.)
Second homes and investment properties are eligible to participate.
How the Program Works
As of July 1, 2013, mortgage servicers must identify eligible borrowers and send them an offer letter that states the terms of the modification, including the monthly payment required for a Streamlined Modification. Upon receiving the letter, the borrower can simply submit the modified payment to begin the trial period.
The borrower must successfully complete the three-month trial period to obtain a permanent modification. If the borrower makes the three payments on time, the mortgage will be permanently modified. However, if the borrower misses a payment during the trial period, he or she will not be eligible for a permanent modification under the program (though another foreclosure alternative may be available).
The Streamlined Modification Initiative is a temporary program that is scheduled to end on December 31, 2015. This means all Streamlined Modification trial period plans must have an effective date on or before that date.
To learn about your options if you are struggling to pay your mortgage, get The Foreclosure Survival Guide.
Key Feature of the Streamlined Modification Initiative
The key feature of this program is that borrowers do not have to document an eligible hardship or their income to be qualify for a Streamlined Modification. This is different from HAMP and other loan modification programs. The FHFA believes that by reducing the amount of documentation required to obtain a modification, significantly more borrowers will be able to save their homes.
Borrowers Are Still Encouraged to Submit Documentation
Even if you are eligible for a Streamlined Modification, you are still encouraged to provide financial, income, and hardship documentation to your servicer so that you can be considered for other modification options, like HAMP. While submitting a full application may sound like a hassle compared to the ease of a Streamlined Modification, you might get a more affordable monthly payment through HAMP (or another program) than you would under the Streamlined Modification Initiative. In addition, borrowers may be eligible to receive certain incentives under HAMP.
To learn about other government programs for struggling homeowners, visit Nolo's Government Foreclosure Prevention Programs area.
Call Your Mortgage Servicer if You Need Help
While a Streamlined Modification might sound like a great deal, it is best not to sit around waiting for the offer if you are currently struggling to make your payments. Call your mortgage servicer as soon as possible so you can be evaluated for an alternative to foreclosure that is appropriate for your situation.
See Nolo’s Alternatives to Foreclosure section to learn more about different loss mitigation options.