[1]Fannie Mae [2] and Freddie Mac [3] recently announced that the standard mortgage modification interest rate will be under 4 percent for the first time ever since the benchmark was established in January 2012.
According to similar releases from the GSEs, starting on November 13, 2015, Fannie Mae will lower its standard modification interest rate [4] from 4 percent to 3.875 percent. Meanwhile, Freddie Mac will lower its standard modification interest rate [5]by the same amount beginning on November 5, 2015.
This will be the lowest the rate has ever been at 3.875 percent.
"By adjusting the interest rate from time to time, you will have the ability to provide borrowers with a rate that aligns more closely to current market conditions," Freddie Mac said in its Standard Modification FAQs [6].
Last month, the GSEs lowered the standard modification interest rate to 4 percent from 4.25 percent, where the rate had been from July 2015 to September 2015.
Servicers must use the current Fannie Mae Standard Modification Interest Rate when evaluating a borrower for a conventional mortgage loan modification, excluding Fannie Mae HAMP Modifications.
Servicers must use the Freddie Mac Standard Modification interest rate when determining the terms of a Standard Modification Trial Period Plan, Freddie Mac Streamlined Modification Trial Period Plan or a Capitalization and Extension Modification for Disaster Relief Trial Period Plan.
Freddie Mac's Guidelines to Using the Interest Rate:
- Visit this Web page [5] on or after the fifth business day of every month for the new interest rate.
- Implement the new interest rate on the tenth business day of the month, but no sooner.
- Use the interest rate that is in effect and posted on Freddie Mac's website when evaluating a borrower until the mandatory effective date of the new interest rate.
- Ensure the interest rate used to determine final modification terms is the same fixed rate that was used when determining eligibility for the Trial Period Plan and calculating the Trial Period payment – even if the interest rate that must be used for new Trial Period Plan evaluations subsequently changes.
Click here [4]to view Fannie Mae's Standard Modification Interest Rate.
Click here [5] to view Freddie Mac's Standard Modification Interest Rate