Bailout

Streamlined Modification Program (SMP)

By Admin

The Federal Home Loan Agency– regulators of Fannie Mae, Freddie Mac, and federal home loan banks– announced a streamlined loan modification program designed to prevent “preventable foreclosures”.  Details of the program which will start December 15th:

Goal is to reduce monthly housing payments, including homeowner association fees and taxes, to no more than 38% of gross household income.

Eligibility requirements:

• Loans must be 90 days or more pats due and can be in foreclosure.
• Loan to value  ratio must be 90% or higher.
• Owner-occupied homes only.
• Servicers will receive a $800 payment for each loan modified.
• Loans will be modified by Reduce interest rate, extending term to 40 years, defer principal payment, reducing principal with difference added to back end of loan.

The most noteworthy elements is the lack of a write-off component when loan principal’s are reduced.

While FHLA only regulates 58% of single family mortgages (approximately 31 million ) representing 20% of delinquent mortgages, the elements of this program are likely to be copied by banks and investors owning non-conforming loans.  JPMorgan Chase, Bank of America, and Citi beat FHLA to the punch by announcing the initiation of mortgage forebearance programs in the last two weeks.  Mortgages that have been sold into mortgage-backed security pools– so called private label mortgages representing 20% of loans outstanding and 60% of delinquencies–  may be modified by loan servicers.

Full post as published by Bailout Report on November 11, 2008 (boomark / email).