Fannie Mae and Freddie Mac want to change the terms of your mortgage – fast. At least, that’s what many homeowners with GSE-backed mortgages are hoping to hear this week as the FHFA kicks off its Streamlined Modification Initiative (SMI) this week. Lenders will be responsible for contacting homeowners and offering them modifications with no paperwork. The homeowner simply will have to make three months’ worth of on-time payments for the modification to become permanent[1]. Although the GSEs will not actually reduce principals on loans at this time, they could reduce interest rates or extend the life of loans by as much as a decade in order to reduce monthly payments by hundreds of dollars.

In order to qualify for the program, homeowners must have loans at least 12 months old, be no more than 24 months behind on payments, and have principal balances of at least 80 percent of the value of their homes[2]. SMI is scheduled to last through December 2015. The GSEs are encouraging homeowners to contact their lenders if they are experiencing financial hardship rather than waiting for an SMI offer because “in many cases working with the servicer to document the homeowner’s financial situation [something left out of the “streamlined” process] will create a more affordable monthly payment than would be available under [SMI]”[3].

by Carole VanSickle