Fannie, Freddie Announce New Loan Mod Plans For Borrowers 90+ Days Overdue

The Federal Housing Finance Agency announced plans for allowing Fannie and Freddie to modify more of their loans. The mods will lower interest rates or lengthen the repayment schedule with the goal of bringing payments below 38% of household income. To qualify, borrowers must:

  • Be 90+ days late on their payments
  • Show affidavit of financial hardship
  • Not have filed for bankruptcy
  • Have taken out the mortgage before Jan 1, 2008

The more favorable terms will apply for a 90-day period, and if you successfully make payments for those 3 months, then the modifications get locked in. To apply, call 888-995-HOPE.

Fannie, Freddie Unveil Plan to Modify Loans [WSJ]

Comments

Edit Your Comment

  1. buckfutt says:

    So again, what do you get if you were responsible when you borrowed money and have never missed a payment?

    SCREWED!

    • SomeoneGNU says:

      @buckfutt:

      No. I think even getting screwed would be more enjoyable than this.

    • tange1 says:

      @buckfutt: Agreed – I want my hand out if everyone else gets one.

      • WhiteTrashLegend says:

        @tange1:

        Amen. It feels like those of us who didn’t bite off more than we could chew get a pat on the back as everyone else gets theirs.

        • allnitecp says:

          @WhiteTrashLegend: I agree, what does this do for me? How does it make it fair to me that I struggle to make my mortgage payments, but I make them anyway? There’s lots of other things I would like to do with my money besides pay my mortgage, but I pay it because thats what I committed I would do when I signed my paperwork.

          I find it hard to believe that this won’t affect me negatively. What if I decide to refinance my mortgage if rates drop, but my mortgage company feels that I can make my current payments so they won’t refinance me?? There’s no way that its fair to me that I, a person with good credit rating and ability to pay my mortgage, pay a higher interest rate and mortgage payment than the person who cannot.

          • ndonahue says:

            @allnitecp: If you are struggling to make your mortgage payment, then perhaps you can benefit from this deal. In the aggregate, a person not living beyond their means in other areas should not have hardship contributing 38% of their household income to PITI. Maybe you can qualify.

    • downwithmonstercable says:

      @buckfutt: How are you getting screwed? You’re still in your mortgage that you can afford, your credit remains in good standing…

    • Martin65 says:

      @buckfutt:

      I am an idiot. I saved my money, I made a big down payment and bought a house with payments I could easily afford, even with a job that pays half my current salary. I have never been late, I carry no credit card debt, and I don’t buy shit I can’t afford.
      What an idiot I’ve been.

    • johnnya2 says:

      @buckfutt: How are you getting screwed.If the person fails to pay the bill they foreclose or file bankruptcy. Then NOTHING gets paid on the mortgage. Seems to me getting a portion of what is owed versus nothing is a good thing.
      And to say your mortgage company wont refinance you because you have good credit and pay on time is just stupid. If your rate is too high, and you have such good credit then refinance with another lender. Of course, if your debt to income ration is out of whack you are in a loan the bank does not think you can afford.

    • bobloblawsblog says:

      @buckfutt: So, they will give me money for not paying my bills? Awesome, im sold.

    • My Head Hurts says:

      @buckfutt:

      This is exactly what I am facing right now. Increased cost of living has me barely able to pay my mortgage, when taxes go up to pay for this I won’t be able to afford mine. It is always the first bill to be paid. If I had slacked on the house payment and paid the cable like everyone else, maybe I could get in on the bailout wagon too?

  2. Greeper says:

    No, if you were responsible, you keep paying your mortgage and then be vilified by politicians for being “rich.” THen, they will send “rebate” checks (not sure how it’s a rbate when there was never a “bate”) to everyone but you. And then raise your taxes. Sorry…better stop paying your mortgage and start referring to yourself as Buckfutt the ______.

  3. buckfutt says:

    @undefined: @downwithmonstercable:

    My taxes are going to bail out deadbeats and crooks. If you don’t feel that screwing, just wait. You will.

    • Anonymous says:

      Instead of the Fed Gov’t paying the mortgage companies $800 per modified mortgage, perhaps they could try and get that back from the note holders via next year’s taxes.

      Sure, the Fed Gov’t would lose whatever interest they could have gotten on 12-months of interest on that $800, but at least they’d get the principle back.

      I’m one of the non-crooked, hardworking folks who could really use this program at the moment. But If I can recover ever so slightly, I’d have no problems giving the Federal Gov’t back it’s $800.

  4. Corporate_guy says:

    What a croc. So even if you qualify as a person under financial hardship you have to not pay your house payment for 90 days to find out for sure. This means those people getting screwed but barely hanging on will not get help unless they give up on financial responsibility. They basically are forcing people to gamble their home in order to get help. Which means those that deserve help, won’t get it, and those that don’t deserve help will probably get it and still screw up and lose their house.

  5. Trencher93 says:

    Okay, nothing about how unfair this is. But…

    What is the definition of: “Show affidavit of financial hardship”?

    “Borrowers would have to provide a statement or affidavit showing that they have encountered some sort of hardship that has impacted their ability to pay their mortgage.”

    Who makes this decision and on what basis? Is it a court document? (If so, how do you get it if you can’t have filed for bankruptcy.) Is it done on your own honor to present your finances truthfully?

    • CrumpsBrother says:

      @Trencher93:

      Most of those eligible are already pretty familiar with the concept of “stated income”, so this affidavit business should come naturally.

    • chrylis says:

      @Trencher93: Generally speaking, an affidavit is a document signed (and notarized) under penalty of perjury; it’s essentially the same as court testimony. In this case, there might be documentation requirements, but I have no idea either.

  6. Anonymous says:

    Pay your bills, continue to pay your bills. Don’t pay your bills, expect taxpayers that UNDERSTOOD their loans to catch you up, then, you get a nice little discount on your mortgage from then forward.
    W….T….F? How about a blanket discount for those of us who live responsibly? Oh yea, that would probably be considered a breach of contract.

  7. legwork says:

    It could have been much worse. I’m thinking this is the closest we’ll get to borrower accountability. Unfortunately, it will only apply to a small subset of the defaults.

    Those who take this mod, assuming they qualify, will have to accept being upside-down and at the limits of their income. In the worst housing market ever. I’m sure many were hoping for a handout and will choose bankruptcy instead. Or, wait for another rescue plan.

    There will be another plan, right? Kind of like week two at the Circuit City liquidation?

    Someone please remind me again how we should be looking forward instead of at the accounts of those who set the wheels of this train-wrech in motion.

  8. alexcassidy says:

    Meh, better this than what a lot of banks are doing- using the bailout money to buy other banks!

  9. TecmoTech says:

    Delaying the inevitable. Let these foreclosures happen so those of us waiting patiently on the sidelines can get in the game!!!

  10. FLEB says:

    @buckfutt: You retain the home value you still have, instead of dealing with foreclosure fire-sales driving down the value of your home, and have less chance of ending up living in a declining neighborhood, or, in the worst-case scenerio, a post-foreclosure ghost town of squatters and vandalism.

  11. Anonymous says:

    So, yeah, where was my bailout 4 years ago when I got divorced and was stuck with a bunch of bills and a house payment? I majorly scrimped and managed to keep everything current. I still don’t have money left over after paying bills to buy anything. Somebody send me some money!!

  12. fashionista says:

    Show affidavit of financial hardship? I thought the 90+ days past due was affidavit enough?

  13. balthisar says:

    Hey, maybe this is the auto bailout? When Ford and GM fire their salaried employees next month, they’ll stop paying their mortgages for three months, and then make modified payments based on 38% of their new Taco Bell salaries! In that case, it’s not irresponsible people, just unfortunate ones.

  14. mppaul2 says:

    I think this will help those who have lost their jobs, depleted their savings and are now facing the loss of their homes…afterall isn’t the mortgage the last thing to go when you find your self in a financial downturn? I’m sure someone out there will find away to scam this system…but I hope the majority of those who really need the life line get it and use it as a lesson learned.

  15. usa_gatekeeper says:

    Funny, when I bought my present home ~24 years ago, plus the two homes before that, there were always attorneys involved in the closings. When did they stop having attorneys present to make sure everything was legit?

    When did they start allowing everyone to just wing it and lie?

    Do-overs on home mortgages?
    Wow. Times have surely changed.

    • Erwos says:

      @usa_gatekeeper: Nothing changed. We bought a home about six months ago, and there was definitely a lawyer involved with the settlement. She even caught a thing or two.

      There is nothing a lawyer can do to stop you from screwing yourself.

  16. tmed says:

    To all of you with this feeling of being cheated, you are missing the point and the size of this collapse.

    The bailouts are necessary to protect YOUR investements. You don’t want to end up upside-down on your mortgage? Then you need this. You don’t want YOUR bank to collapse, then you need this. You want to keep YOUR job (assuming that at some point customers exchange money for a service or goods that keep you in your job) then you need this.

    This is a last-gasp, hail-mary play to keep prices from deflating and watching things get really, really bad. Over Reagan, Bush, Clinton, and Bush, the markets were de-regulated, and de-regulated until they were able to make ridiculous money grabs based on houses of cards that ALL of them were building. Basically a decade of financial success (Clinton and Bush 2) were a flat out lie, and over that time, somehow America stopped producing anything of any value. The accountants saw that money was to be saved by outsourcing jobs, or simply moving them over the borders, and the shareholders were ok with the quick buck, that they failed to notice that down the road. They stopped requiring such stringent rules around who can get a mortgage and people started to buy houses.

    Then wages stagnated, the cost of living increased and wages didn’t go with them, then gas exploded, and people couldn’t afford to get to work and pay their bills. The cards started falling, and now, EVERYONE IS AT RISK.

    Nobody likes it, but the bail outs are the best idea to protect the people who are paying their bills as well.

    • Saeculorum says:

      @tmed: I’m not upside-down on my mortgage. I don’t have a mortgage because I realized that I couldn’t afford a house where I live, despite making more than the median wage. I don’t like having a rate of return of approximately -50% on my investments this year, but that comes with the choices I made – I fully realize that I could have avoided the loss by choosing less risky investments. I don’t care if my bank collapses – it’s FDIC insured for the full amount of my deposits. Moreover, if FDIC collapsed and my bank collapsed, I would only lose approximately one month’s worth of living expenses. Finally, my employer doesn’t interact with individual customers – I chose my job because I thought it’d be resilient to economic woes.

      I want deflation. To me, it’d be freakin’ awesome since I have no debt and am just waiting for housing prices to decrease so I can buy a house from someone who can’t afford it. If they artifically retain posession of their homes, I’m materially affected. Funny, I did all this with no formal financial background other than a high school finance class. I just thought about what I signed and realized that my signature means that I actually intend on abiding by what it’s attached to. It doesn’t take much work.

      These bailouts are creating perverse incentives to be stupid. That can never be a good thing.

      • tmed says:

        @Saeculorum:

        If you lose your job,then robbed and shot because of deflation, you’re screwed.

        That is what deflation leads to: massive unemployment, higher crime rates, and depression (the financial kind).

        Jobs that are resistant to economic woes, are not immune to them. There are not enough of those jobs to support the country’s economy. You may be in a brilliant place to emerge from a depression in spectacular new wealth. The bargains will still be there for you, congrats.

        Do not expect the Government to govern based on your specific needs. They consider you, that is why there bailout will not often reduce the amount of money spent, so much as reconfigure the payments, some interest may go away, but the principal remains, to be paid off later.

      • TecmoTech says:

        @Saeculorum:

        Absolutely Brilliant.

    • buckfutt says:

      @tmed:

      Bullshit. This was not caused by deregulation, this was caused by the GOVERNMENT pushing and “guaranteeing” bad loans to people who were bad credit risks, and by government hacks (mostly Democratic hacks) filling their own pockets at Fannie and Freddie. And now these deadbeats are being called “victims?” To hell with that.

      Let the deadbeats get evicted and the lenders go broke. They both deserve it. And put the crooked politicians in jail while we’re at it.

      • tmed says:

        @buckfutt:

        Except the people in charge, the single biggest person in charge of this mess, Alan Greenspan, admits that this was de-regulation caused this. That the lack of oversight, and an unfounded faith in the market to police itself led to this. Allowing banks and mortgage vendors to make these bad loans, beyond Fannie and Freddie IS deregulation.

        The funding side of this screwed up. Blame the mortgagees for taking loans they can’t afford. Fine. They got sold a bill of goods, by people they should be expected to trust. Let everyone go broke on both sides of this. Fine.

        When they start taking down the rest of us, look out.

        If this was crooked politicians, duping people, then this was idiot voters putting in place tax and spend Republicans. So the problem comes full circle. the public provided no oversight on the politicians, the politicians did what politicians with power and no repercussions do.

        The problem is huge, and it will impact you. I think we are going down anyways, and this is simply arranging deck chairs on the Titanic. But it is this, or Works programs later. More likely, it is this now, and Works programs later.

      • zentec says:

        @buckfutt:

        It’s more complicated than that. Wall Street made a lot of foolish bets on whether or not these people could pay their mortgages. And then took those bets and used other bets to hedge other bets.

        The explosion was caused when people were given mortgages that they were unlikely to be able to pay back; lower class people, middle class people, upper-middle class people. It was amplified by the unbelievably creative stupidity of Wall Street.

        Stupidity has no political affiliation.

      • mac-phisto says:

        @Saeculorum: i understand your sentiments, but can you understand that simply standing by & doing nothing could cause irreparable harm to every aspect of our economy? your 50% loss isn’t entirely due to your bad investments – it can also be attributed to a complete disintegration of the marketplace as a whole. your perceived immunity to other aspects of the decline is just that – perceived. whether or not your company interacts with customers is irrelevant. do they, at some point handle money in some way? if so, they are affected. if you don’t think so, consider the recent problems with commercial paper.

        @buckfutt: see, but that’s where the “deregulation” part comes in. gov’t officials stripped the requirements for what constitutes a conforming loan for the guarantee program without stripping the guarantee itself.

        meanwhile, the government repealed glass-steagal, which disintegrated the walls between the companies that approved, held & insured mortgages & the securities developed around them, creating an enormous conflict of interest.

        & party really has nothing to do with it. the amount of money being funneled into washington by interested parties is where the problem lies, & neither party can claim immunity to that scourge.

    • Karl_Marxs_Nightmare says:

      @tmed:

      the specter of a a deflationary price environment is outside the scope of others’ concerns over potential abuses with the loan modifications that Fannie & Freddie are proposing. you are effectively comparing apples and oranges (fraud and demand deflation are unrelated issues)

      Under the proposed modifaction program, any homeowner (regardless of actual financial distress) could do the following:

      Step #1: simply stop paying their mortgage immediately

      Step #2: wait until 90 days past due, then contact their bank
      (in most cases FICO scores are not dramatically/permanently affected until borrowers are significantly past 90 days late)

      Step #3: receive an affidavit of ‘financial hardship’ (this term is never clearly defined in the explanation of the program and being 90 days past due on a mortgage will likely become a self-fulfilling qualifier of said ‘hardship’)

      Step #4: subsequently do one or more of the following: a) extend the term, b) reduce the interest rate, or c) reduce their monthly payment to the adjusted level of 38% of gross monthly income under the auspices of the Fannie/Freddie program

      Additionally, the ‘fast-track’ nature of this program (as outlined by the FHMA’s presentation on the program) will likely make any thorough or accurate due diligence on the part of the FHMA nigh impossible.

      Even if a mortgage borrower was current on his/her bills, mortgage, and other debt servicing, but simply wanted a easier mortgage terms, they could take advantage of this proposed “deal.”

      By my rough guess, the proposed deal (as it stands) will likely expand the program’s size to cover a significant amount of non-troubled mortgages in the United States. Should the economy continue to spiral downward over the coming quarters, i would almost guarantee that a majority of Americans (rich, middle class, and poor) will come running to get their cut of the gov’t’s personal mortgage bailout plan.

      Some defenders of the bailout would blame otherwise financially solvent people for taking gov’t money when they aren’t at risk, but frankly, why wouldn’t someone use the ‘letter of the law’ for the program’s requirements to get bailout funds if it was available? For anyone who is making more than the Earned Income Tax Credit threshold, they are paying taxes that the gov’t is using for the mortgage bailout but not receiving any tangible benefit…who can blame them for wanting something for monies paid when others receive money when paying nothing?

      A small corollary to the deflationary demand scenario:

      The proposed loan modication programs are basically taking the historical contractual surety of mortgage loans and replacing them with an amorphous, ethereal concept of ‘loan affordability.’ Henceforth, this will allow mortgage terms to be modified on the fly depending on whether or not someone will be able to pay. While studies have shown that successful property foreclosures yield typically less than $0.50 on the $1.00, the legal surety of the contract is what made mortgages trustworthy investments. In turn, the ‘trust’ (financial + legal) in the future cash flows from the majority of mortgages allowed them to be securitized cost-effectively, which allowed greater and greater amounts of capital to flow into the mortgage market, creating opportunity for greater lending flexibility and generally lower rates of borrowing.

      While the current situation is an example of a combination of excess lending capacity, bubble pricing, poor insurance risk management and across the board poor lending standards, the core concept of securitization as a way to increase liquidity and general loan affortability (to good quality borrowers) remains true. After this program is implemented, cost-effective securitization in the future is doomed to failure.

      While you may think that the end of the securitizations mentioned above is a positive thing, there is simply no way that even a fraction of the capital formerly in the mortgage market will return if this comes to pass, and, accordingly, any hope of a recovery of any note in the market is unequivocally doomed from the start.

      • tmed says:

        @Karl_Marxs_Nightmare:

        The Fannie / Freddie loan re-write is NOT a governement sponsored bailout. It is a bailout by Fannie / Freddie (yes, taken over by the government) to help both sides of the ledger. The businesses would rather lower interest and/or defer principal to keep money flowing and to slow their own foreclosure rate. Foreclosure costs them money, the other major lenders are offering expedited re-write programs.

        The affidavit is the interesting part here: what is required? What has to be shown?

        It is clearly designed to prevent someone from simply choosing to stop payment on his / her mortgage simply to qualify for this plan, but will it be enforced?

        Mortgage re-writes have existed for a long time, this just explands their use because so many people qualify.

  17. Anonymous says:

    What I want to know is WHY? when I decided housing prices were out of range for me and I was offered one of these cruddy loans , I took the responsible route and did not buy because the houses were over priced and I would have to fudge the numbers to buy one ! Now I do not own a home and have been throwing away my money on rent. yet my neighbor who played it fast and loose with the truth is gonna get a sweetheart deal my taxes are gonna pay for and keep a home he ccould never afford . I FEEL LIKE I JUST GOT SCREWED!!!!

    • ndonahue says:

      @ShashibalaKaplow: You’re referring to moral hazard, and there is no easy answer unless you believe in karma.

      Maybe you should have a beer with your neighbor and talk about how the financial crisis is affecting both of you. I believe that just about anyone who’s underwater on their mortgage and worried about their job would trade places with you in a heartbeat.

      The vast majority of economists agree that we are all in the middle of an unprecedented economic disaster brought on by a wholesale ignorance of risk — literally no one person or firm understood just how their specific role contributed to / magnified the systemic problem.

      For the next few months, maybe it would help us all to focus on the concept of disaster — when the hurricane hit New Orleans the first objective was to prevent further loss and restore order. Once the rain stopped and city was stable, then the country could begin to debate whether the people were wrong to stay or the government was wrong to under invest in the levy system.

      You’re lucky you’re on financial high ground…just remember that the tide is still rising… Shoring up the levy around the bad parts of town might just be better for you in the long-run than sandbagging your own property.

    • tmed says:

      @ShashibalaKaplow:

      Check again, your taxes are going to either delay the inevitable, and he will be even worse off, or they will have their house saved by reduction in interest and, possibly, deferred principal.

      This is streamlining a process that was already available. It is good to keep people out of foreclosure, for mortgager and mortgagee.

      Yes, Fannie and Freddie are now under Government control, but they are still run as businesses, this is an attempt by businesses to lose less money than they would otherwise lose.

  18. RedwoodFlyer says:

    Having traveled to many non-US countries…I have a hard time feeling bad even for families who got foreclosed out of a 1,200 sq. ft. home…that’s a much higher standard of living than 90% of the rest of the world…

    One of our flight attendants was telling me she overheard two pax in first class (husband and wife, presumably) talking to each other about how they deserved the “treat to themselves” of being in first because of their financial headaches that they’re going through. Just for kicks, I checked the manifest and it turns out that they paid $175 each to upgrade to first at the airport!

    And let’s not forget how many of us see people who should have higher fiscal priorities toting around an iPhone because the “needed a phone anyway”..

    In Virginia, there’s always some ads running for a cash advance place that says that you can use your cash advance to buy a new set of rims in the same place…. If someone’s getting a cash advance, they shouldn’t be buying rims!!

  19. CumaeanSibyl says:

    @buckfutt: There’s a lot more money going to bail out the deadbeats and crooks who lent the money. I could care less about people getting refinance deals if they’re still having to repay the entire loan balance.

  20. ckaught78 says:

    Our Jr High and High Schools need to start teaching basic financial responsibility classes. And for us adults, we need to start having a little basic financial responsiblity (aka common sense). If you make $40,000 a year you should not be buying a $500,000 house, even if a bank was willing to give you the loan. No one put a gun to anyone’s head, although I am sure some people are putting guns to their own heads at the moment.

    • katzeroo says:

      @ckaught78: @ckaught78: People are greedy, thats true and they should know better. Know who should have known even better? The financial geniuses at the banks and mortgage companies who held the keys to this money and approved bad loan upon bad loan. Fraudulent business practice.

      • tmed says:

        @katzeroo:

        Damn skippy!

        Everyone needed a bit of education here, both sides of the deal.

        What gets missed is that a mortgage is a contract between two sides, neither is blameless in this debacle, that is why the lenders have been expanding their emergency plans to accomodate more and more people. The fact that these loans were offered at such volume as to put companies at risk is a failure on the lender’s part. Not being able to keep up with payments is a failure on the homeowner’s part.

        Allowing a system that allows the volume of these loans and other bad investments to threaten the core financial structure of the country is a failure on the government’s part and those who vote them in.

  21. bobloblawsblog says:

    oh sh*t. that means i should cancel my mortgage payment that went out this month. by january, ill qualify! WHOO HOO!

  22. Scott Kidder says:

    Wow!