New modification program offers simplicity and certainty
Fannie Mae announced details last month on its new modification program, which it developed jointly with Freddie Mac at the direction of the Federal Housing Finance Agency.
Fannie Mae Flex Modification combines features of HAMP (Home Affordable Modification Program), which ended at the close of 2016, and Fannie Mae’s Standard and Streamlined Modification programs, which will conclude in October 2017. The Fannie Mae Flex Modification aims at replacing these expiring programs.
Servicers must begin evaluating borrowers for the Fannie Mae Flex Modification no later than Oct. 1, 2017, but may begin to offer the modification to eligible borrowers as early as March 2017. Once the servicer implements the program, they must offer it to all eligible borrowers.
Applying ‘Test and Learn’
The Fannie Mae Flex Modification can be applied to all mortgage loan delinquencies, including mortgage loans that are determined to be in imminent default in accordance with the Fannie Mae Servicing Guide.
“Throughout the housing crisis, there was a lot of ‘test and learn,’ which was the root behind the existing modification programs,” says Bryan Camilli, director of product development and credit portfolio management for Fannie Mae. “At the time, we designed those multiple programs to address the different portions of the portfolio.”
With HAMP expiring at the end of 2016, there was an opportunity to re-evaluate the modification options available to borrowers and develop a simplified program based on knowledge gleaned throughout the housing crisis, he noted.
The GSEs took the lessons learned from the various programs to collaboratively create one program that will serve as the industry model going forward. “Fannie Mae Flex Modification can provide the consistency of HAMP, coupled with the simplicity and certainty that comes from a smaller suite of modification options,” Camilli says.
Building on the concept of “simple,” here are some of the highlights of Fannie Mae Flex Modification. The program:
- Consolidates three modification programs into a single solution.
- Removes the requirement for borrowers with mortgage loans 90 or more days delinquent to submit a complete borrower response package (BRP) to be evaluated for a Fannie Mae Flex Modification.
- Adjusts the forbearance limits to provide greater payment relief to eligible borrowers, targeting a 20 percent payment reduction.
While formally announced on Dec. 14, the program has a mandatory implementation date of Oct. 1, 2017 for all servicers and will be implemented in Fannie Mae’s Servicing Management Default Underwriter™ (SMDU™) on June 1, 2017.
“Our goal is to facilitate a smooth transition for servicers to minimize disruptions to the borrowers in need of assistance with their mortgage loans,” says Camilli.