Washington, D.C. — Today, the Federal Housing Finance Agency, or FHFA, announced a new suite of policy changes that Fannie Mae and Freddie Mac will implement to help communities left behind by the housing recovery. First, FHFA announced that tens of thousands of households who are underwater and delinquent on their mortgages may now qualify for principal reduction, a process that lowers the balance on a borrower’s mortgage when they owe much more than their home is worth and that lowers the risk of foreclosure. FHFA also announced new policies that improve the enterprises’ nonperforming loan sales programs. Investors that purchase delinquent mortgages through these programs will be required to evaluate many underwater borrowers for principal reduction, take responsibility for any properties in the pool of loans they purchase that become vacant, and will be prohibited from offering loan modifications with certain predatory terms.
Sarah Edelman, Director of Housing Policy at the Center for American Progress, issued the following statement:
FHFA’s announcement, which includes allowing principal reduction for certain homeowners and changes to Fannie Mae’s and Freddie Mac’s nonperforming loan auctions, represents an important step forward for homeowners and communities.
By allowing certain borrowers with loans backed by Fannie Mae or Freddie Mac to be eligible for principal reduction, FHFA will help homeowners access an effective loan modification that both protects borrowers and saves the government money. Moreover, FHFA announced a new set of guardrails for non-performing loan sales that help ensure the benefits of such sales accrue to homeowners and better align investor and borrower interest. As the GSEs sell an increasing share of troubled mortgages to investors, the additional protections FHFA announced today are critically important for achieving positive outcomes for struggling homeowners and the neighborhoods in which they live. Going forward, FHFA should carefully implement its newly announced policies and consider how they can be improved to help communities.
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