Lenders Rally Behind Loan Modification Plan

Posted on March 6, 2009. Filed under: Finance, Foreclosure Defense, Housing, Loan Modification, Mortgage Audit | Tags: , , , , , , , , , , , |

The U.S. Treasury Department on Wednesday launched the Making Home Affordable program, which was announced recently by President Barack Obama. The program’s two branches — refinance and modification — are estimated to apply to some 9 million homeowners either behind on payments or at risk of falling behind due to dropping home values, job loss, or other hardship.

The modification program will be effective only or mortgages originated on or before Jan. 1, 2009 on owner-occupied, single-family one- to four-unit properties that serve as a primary residence, the Treasury said. Borrowers in bankruptcy are not eligible, but those facing foreclosure will see foreclosure action suspended during a trial period or while borrowers are considered for preventative options. Within hours of the announcement, the government-sponsored entities (GSEs) and a variety of the largest U.S. lenders and servicers began rallying in support for the program.

Freddie Mac (FRE: 0.37 -9.76%) quickly announced the launch of two initiatives to compliment the administration’s housing plan. Freddie’s new relief refinance mortgage product, which can be as high as 105 percent of the property’s value, is designed to reduce interest rates or amortization terms for borrowers “to improve their position for long-term homeownership success….” Freddie also rolled out a modification initiative to begin April 1; borrowers with Freddie-owned or -guaranteed mortgages originated on or before Jan. 1 will be eligible to receive a workout “in some cases…before they fall behind on their mortgage payments,” Freddie said in a media statement.



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