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FHFA Announces Principal Reduction Program for Homeowners

The Federal Housing Finance Agency (FHFA) recently announced that some homeowners will now be eligible for a principal reduction on their mortgages, which will help the owners stay in their homes.

The program applies to mortgages owned by Fannie Mae and Freddie Mac, two of the largest government-backed companies which purchase mortgage loans. The FHFA’s new Principal Reduction Modification program will allow the companies to offer struggling homeowners principal reduction in order to stay in their homes.

To be eligible for a principal reduction, the homeowner must use the home as his or her main residence, have a mortgage principal balance of less than $250,000, and be at least 90 days delinquent on their mortgage payments as of March 1, 2016. Additionally, the mortgage balance must be at least 115% of the home’s current value. So, if a home is currently valued at $100,000, the outstanding mortgage balance must be at least $115,000.

The FHFA estimates that approximately 33,000 homeowners around the country will be eligible for a principal reduction. Loan servicers will be required to actively identify borrowers who are eligible for the program and must contact the borrowers by October 15, 2016.

If a homeowner is eligible for the program, he or she will first have the mortgage loan adjusted so that the interest rate is at the current market level. Additionally, the terms of the mortgage will be extended to 40 years, and a portion of the mortgage loan will be put into forbearance. If the homeowner makes the first three payments on the modified loan on time, then the amount of the mortgage in forbearance will be forgiven.

For more information about this program, homeowners can review the FHFA’s fact sheet, which will provide more thorough information about eligibility and the steps required in the principal reduction process.

If you are unable to make your mortgage payments, you have several options to reduce your payments, modify your loan, and avoid foreclosure. At Loan Lawyers, our attorneys can provide advice about the best option for your financial situation, and will work to help you afford your home.

To schedule a free consultation, contact Loan Lawyers today by calling (888) FIGHT-13 (344-4813).