New Program For Struggling Homeowners! (2013)

There is widespread coverage this morning of an FHFA announcement indicating Fannie and Freddie will begin offering a streamlined loan modification program in July. The program is expected to help more delinquent borrowers avoid foreclosure. According to FHFA Acting Director Edward DeMarco, “This new option gives delinquent borrowers another path to avoid foreclosure.” The program commences on July 31, 2013, and is expected to end on August 1, 2015. The Wall Street Journal says that previously, borrowers had to provide proof of hardship before trial modifications became permanent. The Journal quotes Leslie Peeler, senior vice president of Fannie Mae’s National Servicing Organization, as saying, “This streamlined modification initiative will cut through the paperwork and simplify the process of securing a permanent mortgage modification for struggling borrowers.” Several news outlets note that some officials and consumer advocates praised the move. One analyst voiced concern that the program could encourage more strategic defaults. But the FHFA said the GSEs “would use existing ‘screening measures to prevent strategic defaulters.'”