Federal Housing Finance Agency (FHFA) director James Lockhart announced on Tuesday that the FHFA, along with Fannie Mae and Freddie Mac, would be adopting a new, streamlined approach to loan modifications.
Lockhart said the loan modification program, which he is asking to be adopted as the industry standard, will take effect Dec. 15. The new approach will target high-risk borrowers who have missed more than three payments, and should help homeowners modify loans and prevent foreclosures, he said.
"Today we are announcing a major program designed to greatly reduce preventable foreclosures with a simplified, streamlined loan modification program to get struggling homeowners into mortgages that they can afford," Lockhart said. "It is an achievable goal if homeowners, banks, mortgage servicers, investors, Fannie Mae and Freddie Mac all work together."
Lockhart said the key to success is the borrowers' ongoing co-operation and communication, and the ultimate aim of the program is to keep people in their homes.
Speaking at the same press conference was Neel Kashkari, Treasury Interim Assistant Secretary for Financial Stability. Kashkari said a key part of stabilizing the financial system is to help homeowners avoid preventable foreclosures.
"We are experiencing a necessary correction and the sooner we work through it, the sooner housing can again contribute to our economic growth. We must explore all tools to help homeowners and increase the availability of mortgage finance," he said.
Kashkari said the Hope Now Alliance is currently helping more than 200,000 homeowners a month avoid foreclosure with a loan workout.
"The adoption of this streamlined modification framework is an additional tool that servicers will now have to help avoid preventable foreclosures," he said. "This framework will not only help those homeowners who receive a streamlined modification, it will also further address servicer capacity concerns by freeing up resources, helping ensure that borrowers do not fall through the cracks because servicers aren't able to get to them."
By Patrick McGee and edited by Nancy Girgis
©CEP News Ltd. 2008