Fannie Mae, Freddie Mac Flexible Mortgage Modifications Bottom Bar

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The Federal Housing Finance Agency on Wednesday canceled the requirement for distressed borrowers to have a current market ratio of a loan to a value of 80% or higher before receiving the type of loan modification offered by two state-sponsored enterprises.

The new Standard Flex terms for Fannie Mae and Freddie Mac are in line with broader efforts to make it easier for borrowers to make the most of home retention opportunities in the form of temporary payment suspensions and federal foreclosure ban end. The change also applies to skyrocketing house prices which has raised the level of capital and put pressure on LTV, making it difficult for borrowers to obtain Flex mods. (The ratio used to determine eligibility for the Flex Mod compares the outstanding loan balance to the home’s current market value.)

“Giving more families the right to lower interest rates will prevent unnecessary foreclosures, help strengthen business ledgers, and make sustainable home ownership a reality for more families currently living in uncertainty of tolerance.” Acting Director of FHFA Sandra Thompson said in a press release.

Tolerance indicators relatively low on GSE, but the number of credits modified by them recently rose in a quarter in a row for the first time in a year. There were 11,434 loan changes in the first quarter of 2021 compared to 9,947 in the previous financial period, but up from 16,773 in the first quarter of 2020.

Lowering the bar for flexible mods as a home hold option follows right on the heels of FHFA’s move to provide regulatory protection for borrowers during the interval between the end of the federal foreclosure ban on July 31st and the start of new interim directive of the Bureau of Financial Protection of Consumers on Dealing with Borrowers In the end of August.

GSE announced in April that they consideration of empowerment for problem borrowers who have been patient and unable to return to their original payments.



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