On November 11, Federal Housing Finance Agency (FHFA) Chairman Jim Lockhart announced a new program entitled the "Streamlined Modification Program, " which hopes to curb foreclosure by simplifying the process that determines whether homeowners are eligible to receive new loans.
The program will provide assistance through a variety of methods. Options include renegotiating mortgage payment loans to equal 38% of the homeowner's annual income, extending loan terms from 30 years to 40, reducing interest rates or delaying payments on the principal of the loan. The Streamlined Modification Program will take effect December 15, 2008.
In order to qualify for the program, borrowers must have a mortgage that is owned or guaranteed by Fannie Mae/Freddie Mac, presently occupy the home, be 90 days delinquent on their current mortgage payment, demonstrate financial hardship, have not declared bankruptcy and owe more than 90% of what the home is currently worth.
Although this new measure intends to keep homeowners in their homes by using an effective loan modification process that provides individuals with more affordable loans, it has also raised many eyebrows from federal leadership, policy makers and affordable housing advocates alike.
While the program is modeled after a similar loan modification measure taken by the Federal Deposit Insurance Corporation (FDIC) at IndyMac, FDIC Chairwoman Sheila Bair has publicly criticized the Streamlined Modification Program for focusing so narrowly on government sponsored enterprises Fannie Mae and Freddie Mac. Bair also questions the overall implementation of the program and currently advocates for a program that addresses foreclosure prevention through loan modification at a much larger scope.
The FDIC, alongside leadership in the Treasury Department and the Federal Reserve encouraged the federal government to aid "creditworthy borrowers" in a press release today.
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