The troubled housing market continues to offer unusual possibilities for American home buyers. But with rising foreclosure rates, record default notices, and the almost certain prospect of a flood of REOs on the market in the coming months, interest rates may soon begin to reflect some hope for a more favorable trend. On March 26th, Fannie Mae announced a program intended to assist delinquent oraration homeowners in their ability to negotiate reduced mortgages.
Fannie Mae has been showing significant resistance to forward sales of subprime loans. Despite the current mortgage crisis, they have still managed to obtain loans for a full 90% of home buyers at relatively low interest-rates.
The purpose of the new program is to encourage lenders to reduce loan amounts for homeowners in need of loan modifications by decreasing the loan amount down to 100% of home value. If the lender reduces the loan amount to 120% of the full value, they will receive a 3% incentive. Other changes include eliminating additional fees that have been added to such loans, retaining the ability to charge interest on at least the amount of the delinquent amount for the first two years of the loan.
However, this is only a small teaser at the loan principal reductions that Fannie Mae is willing to offer. If mortgage principal reductions were to become the loss leader that many experts believe they are now, we would see many more foreclosures and an even greater need for loan modifications.
The possibility of foreclosure has created a huge dilemma for many borrowers. Oftentimes they would like to keep their homes but find that they owe more money to the lenders, then the homes would sell for in the current market. This results in their credit record taking a Routledge of degradation. Although FHA loans still have the option of loan modifications, there are no guarantees that the outcome will be favorable.
In addition to this two pronged attack on interest rates, Fannie Mae also announced recently the completion of their Homeowner Education Program. This program is designed to help borrowers who can not qualify for a modification decide what kind of loan they may be eligible for instead.
Hopefully this new program will greatly assist potential borrowers in obtaining the loan modification they will need to help them avoid foreclosure and remain in their homes. Many borrowers who are stuck in subprime loans due to excessive origination fees or who have had a bad history with the lender may very well qualify for loan modifications. But, as interest rates continue to rise, and interest-only and adjustable rate loans reset, this line of defense against rising payments may prove to be uneffective for many of these borrowers who continue to owe more than their homes are worth
Fannie Mae’s announcement is the latest indication that the bottom is beginning to fall out of the housing market. Although this news is yet to be delivered to all lenders, Fannie Mae is taking strong steps in the right direction. Their key actions show the willingness of the Federal Government to take stringent measures to protect the consumer, the lender, and Fannie Mae. This coupled with the fact that most lenders are not successful in their efforts to reduce foreclosures, will likely result in a large number of homes coming onto the market previously unattached.
Fannie Mae’s Homeowner Education Program is now in its second year. According to officials, this program has helped more than 300,000 borrowers to achieve successful loan modifications.
If you would like to find out how you can get a loan modification and if you qualify, it is recommended that you visit our website.