Streamlined Modification Changes Increase Borrower Eligibility
By Don Geiger | January 21, 2016
A streamlined loan modification program for delinquent borrowers has been expanded to increase the number of borrowers who are eligible to participate.
“We are making some adjustments to the entry points of the program to expand our eligibility,” says Bryan Camilli, director of product development at Fannie Mae. “The changes will increase the number of borrowers who will get an interest rate reduction or an overall lower payment. Some borrowers, if they were previously eligible, may get better terms.”
Fannie Mae introduced the streamlined modification program in July 2013 to offer a loan modification solution to delinquent borrowers who have not fully responded to early outreach efforts by servicers.
Under the program, servicers mail directly to the borrowers a streamlined modification solicitation letter and a three-month trial period plan for a permanent modification. The borrower accepts the trial period plan by making the first month’s payment, and upon successful completion of the trial and return of a signed modification agreement, the loan is permanently modified.
“We saw a need to offer a streamlined solution for borrowers who have not previously responded to servicer outreach efforts before the loan is referred to foreclosure,” Camilli says. “Throughout the housing crisis, part of the struggle was getting to borrowers early enough to diagnose the issues. Offering this option at 90 days into delinquency was industry-leading; it provides delinquent borrowers another chance to obtain a loan modification prior to foreclosure referral.”
Monthly payments can be lowered by taking advantage of options such as:
- Changing the interest rate on the loan to current market modification rates, which may be lower than the loan’s previous rate
- Extending the loan to up to 480 months
- Offering principal forbearance without accruing interest
“Our intent was to create a program that could reach the majority of borrowers who need help but have been unsuccessful in fully responding to servicer outreach efforts,” Camilli says.
“For some eligible borrowers we have otherwise been unable to get on the phone, providing a direct offer encourages them to reach out and helps us resolve some assets we otherwise wouldn’t have resolved,” says Martin Burd, vice president of client management and strategic initiatives at Ditech Financial.
“It also gives borrowers an option to stop the foreclosure process from even beginning and lock in a solution before other mitigating factors play a role.”
For New Jersey-based PHH Mortgage, the program opens channels of communication that help identify the best possible solutions for struggling borrowers, says Jason Webb, director of loan modifications and workouts. “Streamlined modification offers borrowers another opportunity to retain their homes,” Webb says. “It’s easy for them to enter the program, and it has been a success in helping struggling borrowers stay in their homes.”
Changes to the program, which were introduced in September, are designed to help borrowers who may not have fully recovered from the housing crisis.
“We continuously enhance our programs as we see who continues to need help,” Camilli says. “We’re adjusting some of the triggers to expand our eligibility and offer assistance to more of our delinquent population.”
Don Geiger is a freelance writer based in Dallas.