On April 14, 2016, Fannie Mae and Freddie Mac announced that they would be offering a one-time Principal Reduction Modification program. On Monday, The Federal Housing Finance Agency (FHFA) launched an interactive online map in response to one of the main questions received, “where are eligible borrowers located?” This map highlights the top 10 states where potentially eligible borrowers live; the program, however, is open to eligible borrowers nationwide.
As observed from the map, eligible borrowers have a tendency to be concentrated in communities across the country that have not yet fully recovered from the foreclosure crisis. In each of the top 10 states, the map provides a breakdown by zip code or MSA of potentially eligible borrowers. Interacting with the map, state-specific data, including the number of potentially eligible borrowers in each state, the average unpaid principal balance of each loan, the average length of delinquency, and the average loan-to-value ratio can be obtained.
Though the map shows the buyers whom Fannie Mae and Freddie Mac estimate will be eligible for the program, a borrower's actual eligibility will be decided by their servicer once the program has been implemented.
In totality, FHFA estimates that more than 30,000 borrowers will be eligible nationwide. This number, although slightly smaller than was estimated when FHFA announced the program, can be attributed to the housing market that is continuously evolving and potentially has improved in some areas.
Over the past four years, the number of underwater borrowers with a Fannie Mae or Freddie Mac loan has decreased by over 80 percent. In addition, only about 2 percent of all underwater loans nationally are both severely delinquent and owned or guaranteed by Fannie Mae or Freddie Mac. This program is the final crisis-era modification program designed to give eligible borrowers a last opportunity to avoid foreclosure as well as remain in their homes.
FHFA, Fannie Mae, and Freddie Mac have strategized that in order to reach as many potential eligible borrowers as possible, they will leverage pre-existing relationships between servicers and local housing partners in the top MSAs and each of the Housing Finance Agencies in the top 10 states. Updates from FHFA on additional efforts to engage the eligible population will be presented as well throughout the summer and fall of 2016.
Servicers will begin soliciting potentially eligible borrowers no later than July 15, which will enable borrowers who believe they may be eligible for a Principal Reduction Modification to begin the process that may include a reduced monthly payment, an interest rate reduction and forbearance of principal and/or amounts in arrearage. Borrowers determined to be eligible will see their forbearance amount converted to forgiveness. Additionally, servicers must solicit all borrowers eligible for the Principal Reduction Modification no later than October 15 and all solicitation offers must be sent by December 31.
To view the interactive map, click HERE.