Freddie Mac Streamlined Modification-Option of Last Resort
Even with home prices and sales rising, an incredible 6 million homeowners are in default or foreclosure, more remain underwater or still hope to have their mortgage modified to more affordable terms. A new Streamlined Mortgage Modification was recently announced to help fix that.
What’s new about the Streamline Modification is that – as incredible as it sounds - you don’t have to submit any paperwork or get approved or even sign anything to have your mortgage loan modified. If you’re 90 days or more late, you meet the eligibility requirements and you send in the new payment amount on time, you get the modification. But again, you have to be eligible and that requires that the loan be more than a year old, owned or insured by Fannie or Freddie, and be at least 90 days past due. Amazingly, the property can be any type, primary residence, second home, investment property and occupied, vacant, even condemned !
But the Streamline is really meant to be an option of last resort. It’s for folks who are already very late on their payments but want to avoid foreclosure and keep their home, so their credit is scarred and they don’t know how to catch up and get out of the hole. Compared to a program like HAMP designed to help folks who may have gotten their loans during the bubble – you have to have closed before 2009 – the Streamline only requires that you closed more than a year ago…it doesn’t care about that or anything else other than helping you avoid foreclosure right away. That said, the modified payment has to be less than your prior payment, but that still does not mean it will be affordable in the long run. Unlike HAMP or other modifications which reduce your payment to 31% of your gross monthly income (and even then as many as 40% of borrowers re-default), the Streamline modification doesn’t even look at your income or affordability
Essentially, the Streamline Mortgages really just helps you get out of default, but making the payments may still be tough, so for a lot of folks it’s only going to be a short term solution, they’re going to have to sell or something. You also don’t get the incentive payments some borrowers earn under HAMP.
To get a streamline modification, your servicers will send you a letter with the new payment amount. all you have to do is start making payments and stay current for the 3 month trail.
The streamline officially began July 1, but the infrastructure should be going on line shortly. Stand by for further intell!