Fannie Mae and Freddie Mac have announced the first-ever principal reduction loan modification program for homeowners with underwater mortgages – excellent news for both homeowners and investors.
The implementation of this program is an important reversal of a poorly-conceived FHFA policy that has been in place since the government bailout of Fannie Mae and Freddie Mac during the housing market collapse. Since then, the agency has strictly prohibited principal write-downs on delinquent loans because they argued doing so would create a "moral hazard."
Investors also stand to benefit from this change because homeowners who owe less than or only slightly more than their property’s value will be much more likely to make payments on their mortgage. Thus, investors can make more on the net value of the recovering loan versus what they might hope to recover through liquidation.
In order to be eligible for the new principal write down program, homeowners must meet the following criteria:
- The must be at least 90 days behind on their mortgage as of March 1, 2016
- They must owe more than 115 percent of the value of their home
- They must have an unpaid principal balance of $250,000 or less
- They must live in the home that secures the mortgage
Keep in mind that this new rule only applies to loans that were 90 days delinquent as of March 1, so do not attempt to strategically default on your loan. Furthermore, if you are currently in a loan modification, do not stop making payments on your loan.
Atlas Consumer Law is now assisting homeowners who are interested in this program. Call us today to learn more, as there are time limits and deadlines. Our Chicago consumer lawyers can determine your eligibility, guide you through the application process, and ensure that your application receives a proper review. Even if you are not eligible, it is still wise to consult with a lawyer before making any decisions related to your home loan. There may be other options available that you may not have been aware of!
If you are behind on your mortgage payments and are looking for a solution regarding your underwater property, turn to our team for the guidance you need to get back on track. Call us now to request your free consultation: (312) 313-1613.