WASHINGTON – Fannie Mae and Freddie Mac have adopted a mortgage modification program that will speed up loan modifications for troubled loans held by the mortgage finance giants.
Borrowers must be three months behind on their home loans. The interest rate or principal amount of the loan would be reduced so that borrowers would not pay more than 38% of their income on housing expenses. The homes must be owner-occupied.
The plan applies to loans made on or before Jan. 1, 2008.
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Fannie Mae and Freddie Mac control more than 58% of the mortgage loans in the U.S. One percent of the loans backed by the GSEs are 90 days or more past due.
Federal Housing Finance Agency Director James Lockhart said he would like to see the plan adopted as the industry standard.
But the plan already has detractors. Fox Business News has reported that FDIC Director Sheila Bair criticized the program as falling short of what is needed.
Officials from the Treasury Department, Wells Fargo & Co., HUD and Hope Now, an alliance of mortgage companies organized last year by the Bush Administration, were in attendance at the press conference announcing the plan.
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