A new program was unveiled Tuesday to help to revise mortgages and improve the heavily beaten real estate market.
The program focuses on Fannie Mae and Freddie Mac, which own or back about 31 million mortgages worth a total of $5 trillion. The two firms were taken over by the federal government in September as they were experiencing heavy losses in their portfolio.
Elifibility considerations are as follows:
One benefit for the homeowners is that their mortgage payments would be amended by lowering their interest rates or having a longer repayment schedules. The objective of which is to bring the monthly payments below 38% of their monthly household income. Loan terms could be spread-out to 40 years while interest rates could be lowered for five years and then increased to a predetermined level.
Officials see this program to help hasten loan modifications. "We expect that it could significantly increase the number of modifications completed," said James Lockhart, director of the Federal Housing Finance Agency, the regulator that oversees Fannie and Freddie.
The standard is applicable to loans owned and guaranteed by Fannie and Freddie. Officials just hope that this will also be applied by the whole real estate mortgage industry.
There are still no available figures as to how many loans owned or backed by Fannie or Freddie is the program applicable to or how many are eligible. Fannie reported this week that mortgages which 90 or more days delinquent accounts to 1.7% of its mortgages by value. Also about 300,000 of its 18 million mortgages could be potentially eligible.
Freddie’s end of the second quarter results had 115,000 delinquent loans on its books, or about 1% of its total. No third quarter results yet but is more likely that the numbers will be significantly higher for the third quarter.
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