Some information on Freddie Mac's Streamlined Modification program by an Assistant Case Manager at Lieb at Law, P.C., Laura Palermo:
As of July
1, 2013 Freddie Mac is going to temporarily offer a new type of mortgage
modification called a Streamlined Modification. The Streamlined Modification
differs from the Standard Modification by way of the application process.
Traditionally a delinquent mortgage holder (a.k.a. “borrower”) would have to
endure a drawn-out review process which requires the borrower to submit a Borrower
Response Packet which includes financial documentation and proof that they
are/were experiencing a hardship. During this process the lender may request any
and all documents which they feel is necessary for proof that the borrower
encountered a hardship and now is able to afford a loan modification should one
be granted. The modification application process can be daunting depending on
the lender and the elements of the borrower’s situation.
The
Streamlined Modification does NOT require the borrower to submit a Borrower
Response Packet; meaning that the lender no longer has to verify the borrower’s
income or hardship. Similar to the
Standard Modification, if the borrower is eligible, the borrower will be
required to successfully complete a trial period of at least three months prior
to being offered a permanent modification, which will be subject to the same
terms as defined for the Standard Modification.
The
eligibility requirements for the Streamlined Modification are as follows:
1.
Mortgage must be a first-lien which is owned,
securitized, or guaranteed by Freddie Mac.
2.
The pre-modified mark-to-market loan-to-value
(MTMLTV) ratio (gross unpaid principal balance of the current loan, including
any principal forbearance as a result of a prior modification, divided by the
property value) must be greater than or equal to 80 percent.
3.
Mortgage must be obtained at least 12 months
prior to modification.
4.
Borrower must occupy the property as their
primary residence
5.
Borrower must be at least 90, but not more than
720 days delinquent on their mortgage payment.
While this does sound like a great
alternative to the Standard Modification it can be a risky move on Freddie
Mac’s part. For example, the Streamlined Modification review guidelines (i.e.
no verification of income necessary) are very similar to a previously common
practice by lenders and servicers called a “blind modification”. The blind
modifications granted borrowers with a refinance or modification without ever
reviewing their finances. For some borrowers it worked wonderfully, while for
others they could still not afford their payments and then would find
themselves again in default with no further options for modification.
Despite the potential risk, I have
high hopes for the Streamlined Modification program as it will present many
delinquent borrowers with the opportunity to bring their mortgage current and
out of delinquency without having to incur as many fees. Also, this may present
many borrowers who are ineligible for Standard Modification due to their
inability to prove hardship or verify their income to keep their homes. For further information on the new program
check out Freddie Mac’s news brief, click here.
