By Lily Leung
May 10, 2012
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| AP file photo |
If you're a struggling
homeowner in California with a mortgage owned by either Fannie Mae or
Freddie Mac, then you may have a shot at a home-loan reduction through a
$2 billion state program.
Officials
with Keep Your Home California, which gives out mortgage aid, announced
a key change earlier this week in its principal-reduction program that
now allows both Freddie and Fannie to participate.
Starting in June, mortgage
servicers will no longer be required to match program money
dollar-for-dollar in order for a principal reduction to happen. However,
servicers would have to agree to either a term or rate cut, or both.
The state housing agency made the change to encourage more participation
in a program that has gained little traction in the past year.
"In
response to this week's announcement by the California HFA (Housing
Finance Agency,) the Enterprises will work with the HFA to apply its new
program to Enterprise loans," according to a statement from the Federal
Housing Finance Agency, which regulates Fannie and Freddie.
What's
important to note: Freddie and Fannie would not be paying off any loan
balances in the Keep Your Home California program. With the matching
requirement gone, the program itself would pay for 100 percent of the
mortgage reductions.
Still,
their participation in the state program could have a big impact
considering Fannie Mae and Freddie Mac own more than 60 percent of
mortgages in the state.
Fannie
Mae and Freddie Mac made it clear to servicers in December that they
could take part in mortgage-aid programs paid for by the Hardest Hit
Fund, or the bailout, as long as they fit these criteria:
--The modification assistance program does not require the Servicer or Freddie Mac to make a financial contribution or match any assistance provided by the HFA--Program participation and parameters for receiving assistance do not conflict with Freddie Mac’s modification requirements under the Guide or the Servicer’s other Purchase Documents, as applicable--Receipt of funds does not impair the first Lien priority of the mortgage--Funds are remitted to the Servicer from the HFA in a one-time lump sum payment
U.S.
housing finance director Edward DeMarco, who regulates Fannie and
Freddie, has been feeling the heat from California and federal leaders
over the agency's unwillingness to cut mortgage balances of borrowers
with loans owned or backed by Freddie or Fannie.
He
has long said that mortgage write downs are not in the best interest of
taxpayers and that the agency has determined other tools, such as the
Home Affordable Modification Program, or HAMP, are already doing the job
of helping at-risk homeowners avert foreclosure.
Source: UT San Diego
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