by Myles Biggs
A new program for struggling home owners, known as the
Streamlined Modification Initiative, went into effect earlier this week.
Through this new, Federal Housing Finance Agency (FHFA) backed program, home owners that are at least 90 days behind on their
loans will begin receiving offers from lenders - allowing them to lower
their payments on mortgages backed by Fannie Mae and Freddie Mac.
These lower monthly payments will be achieved by both
extending the loan term and lowering the interest rate. For example, if a current
home owner has a $250,000 loan with a 30-year term and an interest rate of 6%,
than their monthly payment would be $1,499. By extending this loan to a 40-year
term and lowering the interest rate to 4.5%, the monthly payment would become $1,124
– a savings of $375 per month.
This new effort is “streamlined” because it eliminates the
filing of financial paperwork. Instead of mountains of paperwork and other
financial hurdles, home owners will simply have to meet their new payments for
a three consecutive month trial period. After three months, the new monthly
payment then becomes permanent.
While this is an opportunity for many home owners with
high-rate loans to refinance, the FHFA has not announced how many struggling
home owners will be able to receive these loan modifications.
In addition to being at least 90 days behind on payments,
the Streamlined Modification Initiative comes with other stipulations; the loan
must be at least one year old, borrowers cannot be more than two years behind
on their payments and the principal balance must be 80% or more of the value of
the home. The FHFA plans to run this initiative through December 2015.
What are your thoughts on the Streamlined Modification Initiative?
Tell us in the comments section below!