Fannie Revises Policy Regarding HAMP Nonqualifiers

Fannie Mae has revamped its forbearance policies for homeowners who are ineligible or don't qualify for loan modifications under the Obama administration's Home Affordable Modification Program. Fannie's new "Payment Reduction Program" replaces its HomeSaver Forbearance Program starting Nov. 1; the old program allowed for a temporary 50% reduction in the borrowers monthly payments. Under PRP, the borrower's interest and principal payments are reduced by 30% for up to six months while the servicer considers other workout solutions. "Reducing the payments by 30% rather than the previous 50% is more logical as permanent solutions are closer to 30% than 50%," Fannie spokesman Brian Faith said. "This will make the adjustment from the temporary solution to the permanent solution easier for borrowers," he added. This change comes at a time when tens of thousand of borrowers in HAMP trial loan modifications are not expected to complete the process or receive permanent modifications. Fannie's PRP program also provides temporary relief for struggling borrowers with second homes or investment properties. Relief under the HAMP program is restricted to the borrower's primary residence.