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GSEs Announce Lower Standard Modification Interest Rate

Starting September 1, ""Fannie Mae"":http://www.fanniemae.com/portal/index.html and ""Freddie Mac"":http://www.freddiemac.com/ will lower their standard modification interest rate from 4.625 percent to 4.25 percent.

The GSEs stated the rates are adjusted based on market conditions. Beginning August 1, Workout Prospector will prompt users to apply the 4.25 percent interest rate if the ""Workout Decision Date"" field is on or after August 1.

While servicers are not required to offer the new interest rate before September, the GSEs encourage applying the new rate for standard modifications with trial period plans set to start on or after August 1. The interest rate used when a borrower is permanently modified must match the interest rate for the trial period.

The standard modification is for borrowers who are in need of assistance, but are not eligible for HAMP or defaulted while already on a HAMP modification.

About Author: Esther Cho

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