Federal home-finance giants to simplify loan modifications

| Mar 29, 2013 | Foreclosure |

It is a little late in coming by a lot of peoples’ measure, but the federal home-finance companies, Freddie Mac and Fannie Mae say they are now ready to start making it easier for underwater homeowners to obtain some sort of a bailout.

Considering that the changes these entities are touting won’t take effect until July, it’s hard to gauge how effective they may be in staving off foreclosures for the many in Texas who remain in dire economic straits because of the Great Recession. For a lot of folks, the most viable alternative for avoiding foreclosure and saving their homes may be to file Chapter 13 bankruptcy. Consulting an attorney is the best way to determine if that’s the case in any given circumstance.

The changes being put in place by Fannie and Freddie, which guarantee more than half of all U.S. home loans, could reduce monthly home payments for those who qualify for the help by an average of about 30 percent, according to officials. Under the program they announced this week, recipients of loans backed by the two operations who get behind on their payments by 90 days or more won’t have to prove financial hardship as they do now to obtain lower monthly payments.

Rather, they will be allowed to default into a process in which, if they manage to make reduced payments for three months straight, their new lower loan terms will become permanent.

Officials say their taking the steps to streamline the loan modification process and eliminate red tape. But there are many critics who note that the move by the Federal Housing Finance Agency lags well behind similar actions taken by private lending banks a year ago as part of a settlement with state attorneys general over alleged foreclosure abuses.

The take away from all this may be that despite this latest move, it may still be wise for hurting homeowners to consider bankruptcy protection in order to exercise the greatest measure of control over their personal assets.

Source: Los Angeles Times, “Fannie Mae, Freddie Mac to offer streamlined loan modifications,” E. Scott Reckard, March 27, 2013

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