What Is A Loan Modification?
A loan modification is an agreement between a borrower and their mortgage company to alter or modify the existing terms and conditions of a mortgage. The contract changes the loan such as extending the length of the loan, changing the monthly payment amounts, and also a change of interest rate.
What Is A Fannie Mae Flex Modification Program?
The Fannie Mae Flex Modification (New modification program) combines features of Fannie Mae HAMP (Home Affordable Modification Program) that expired in December of 2016 and Fannie Mae’s Standard and Streamlined Modification programs. The purpose of the Fannie Mae Flex Modification is to replace the expired programs with a single modification program offering Servicers a flexible and easier way, in a changing housing environment, to help more borrowers qualify for a loan modification.
Servicers may begin to implement Fannie Mae Flex Modification as early as mid 2017, and evaluate borrowers for the new program no later than Oct. 1, 2017. Once the new program Fannie Mae Flex Modification has been implemented by services they may no longer offer Standard and Streamlined Modification programs.
Bryan Camilli, credit portfolio management for Fannie Mae and the director of product development said: “Throughout the housing crisis, there was a lot of ‘test and learn,’ which was the root behind the existing modification programs. At the time, we designed those multiple programs to address the different portions of the portfolio.”
Modification Program Highlights
Building on the concept of “simple,” the Fannie Mae Flex Modification program leverages components of HAMP and Standard and Streamlined programs. Here are some of the highlights of Flex Modification program:
- Consolidates three programs into a single modification program.
- Can be applied to all mortgage loan delinquencies. Removes the borrower’s requirement having mortgage loans 90 days or more delinquent in submitting borrower’s documentation “Borrower response package” to be evaluated for the new Fannie Mae Flex Modification program.
- Offers additional payment relief and adjusts the forbearance limits to eligible borrowers, offering 20% payment reduction.
What Servicers Need to Do?
- Follow Evaluation Hierarchy
The Servicer must, prior to implementing the Fannie Mae Flex Modification, follow the Servicing Guide existing loss mitigation evaluation hierarchy as described in the Guide.
- Review The Fannie Mae Flex Modification Requirements
Servicers must review the program requirements in Lender Letter LL-2016-06, including the modification terms, eligibility requirements, solicitation, and executing and recording requirements.
Get Ready For The New Program
The program was formally announced on Dec. 14, and for all servicers, it has a mandatory implementation date of Oct. 1, 2017, and will be implemented on June 1, 2017, in Fannie Mae’s Servicing Management Default Underwriter™ (SMDU™).
After the implementation of Fannie Mae Flex Modification, many homeowners who previously have fallen behind on their mortgage loans may be eligible to modify their mortgage under the Flex modification program and may come out of the path of foreclosure.
Camilli added, “Our goal is to facilitate a smooth transition for servicers to minimize disruptions to the borrowers in need of assistance with their mortgage loans.”