Fannie Offers Personal Loan Aid
Washington-Fannie Mae is giving servicers a new tool called HomeSaver Advance to help delinquent borrowers who are getting back on their feet but don't have the resources to cover missed payments.
Starting in April, Fannie servicers can offer borrowers an unsecured personal loan of up to $15,000 to cover missed payments, escrow advances, homeowner's association dues, and even late fees so the borrower can resume timely payments.
The homeowner does not have to pay interest or principal on the advance for first six months.
"It helps simplify and streamline the workout process for applicable loans, as it provides an option for earlier resolution of delinquent loans," Fannie says in a notice to its servicers.
Borrowers that have resolved the reason for their delinquency can qualify for a HomeSaver Advance, which has a 5% interest rate and amortizes over 14.5 years.
"This product helps us reach the many borrowers who find themselves in a position where they can make their monthly payments over the long run but simply lack the means to catch up on their missed payments," said Bank of America spokesman Terry Francisco.
Bank of America tested HomeSaver in a pilot program and found it easy to use and well designed. "It enables servicers like of Bank of America to make a decision on the spot and e-mail a confirmation document to the borrower," he said.
With HomeSaver Advance, servicers can cure delinquent loans that are in mortgage-backed securities so Fannie does not have to purchase the loan out of the pool and record a fair value loss.
"It allows us to keep the loans in the MBS pools during workout," a Fannie executive said, and the company hopes to save hundreds of millions of dollars.
Fannie recognized a $1.1 billion loss on delinquent loans purchased out of MBS pools during the third and fourth quarters of 2007.
A borrower can only receive a HomeSaver Advance once and borrowers that are in bankruptcy or had debts discharged in bankruptcy are not eligible.
The workout fee for servicers using the advance option is $600. Fannie is using a third party to service the HomeSaver advance promissory notes. (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/