Are you not eligible for the US government’s Home Affordable Modification Plan — the Hamp?
Are you a second homeowner, or investor in homes, underwater and struggling to pay your mortgage?
Then never fear, the US’s government-sponsored enterprises, specifically Fannie Mae, are on the case with a mortgage modification solution for you!
From HousingWire:
Mortgage giant Fannie Mae (FNM: 1.10 0.00%) announced that its new Payment Reduction Plan (PRP) provides forbearance for struggling borrowers who are ineligible for the Home Affordable Modification Program (HAMP).
Through HAMP, the US Treasury Department provides capped incentives to servicers for the modification of eligible loans on the verge of foreclosure. The PRP will grant transitional support for borrowers who do not qualify for HAMP while more permanent mortgage solutions are determined, according to Brian Faith, a vice president at Fannie Mae.
The mortgage principal and interest payments will be reduced by up to 30% for borrowers qualified for PRP, which replaces Fannie’s HomeSaver Forbearance program. PRP reduces the payments by 30% rather than the previous 50% under HomeSaver Forbearance, because permanent solutions are closer to 30%, Faith said.
Faith added that non-owner-occupied properties became eligible under PRP, and owners will receive new options and support for their investment properties and second homes – even though they do not fit under the HAMP umbrella.
Who says the US government isn’t generous?
Before we get too outraged, however, we should note that, unlike Hamp, which uses taxpayer subsidies to make loan modifications more palatable for lenders, this looks to be more about reducing costs to Fannie Mae than subsidising second-home owners (though that is an inevitable outcome).
From American Banker:
Any kind of workout, including those for investors, involves a “cold calculation” of whether a foreclosure would be costlier, said Steven Horne, the founder and president of Wingspan Portfolio Advisors LLC, a Carrollton, Tex., servicer that specializes in highly delinquent loans. It is easier to work with troubled borrowers who live in their mortgaged homes because they typically have greater interest in holding onto the properties than do borrowers who are not using potentially underwater investments as residences, Horne said. But making reduced payments for six months is “generally a strong indication” that an investor does not plan to walk away, he said.
The question of course, is, will it work — and with what ultimate effect on Fannie Mae?
Related links:
Hamper-ed – FT Alphaville
Anatomy of a Hamp modification – FT Alphaville
Payment reduction plan – eFannieMae.com