Fourteen members of the House of Representatives sent a letter to Director of the Federal Housing Finance Agency (FHFA) Mel Watt on April 14 urging FHFA to provide debt relief to long-standing underwater borrowers whose mortgages are held by Fannie Mae and Freddie Mac. Representative Keith Ellison (D-MN) initiated the letter. On the same day, Director Watt announced that Fannie and Freddie will forgive mortgage debt for certain underwater borrowers.
The letter states, “We have long urged FHFA to provide principal reduction as a means to avoid foreclosure and stabilize families and communities. We have been greatly frustrated by the delay. Empirical evidence from other lenders demonstrated that principal reduction avoids foreclosure and enables sustainable homeownership for troubled borrowers. It is a win-win with benefits for Fannie and Freddie and for families across the nation. We urge FHFA to implement a robust principal reduction program that avoids foreclosure and preserves sustainable homeownership for a significant number of borrowers.”
On the same day the letter was issued, Director Watt announced that principal reduction will be available to borrowers who have an outstanding principal balance of less than $250,000, owe more than their homes are worth, and are more than 90 days’ delinquent on mortgage payments as of March 1, 2016. FHFA estimates that 33,000 people would be eligible for the Principal Reduction Modification program. The program is a one-time offer that will expire on October 15, 2016.
"This plan will no doubt be viewed by some as too small and too late and viewed by others as too large and unnecessary," FHFA director Mel Watt said in a statement. "However, the plan is consistent with FHFA's statutory obligation to ‘maximize assistance for homeowners’ by providing some borrowers what could well be their final opportunity to avoid foreclosure."
Read FHFA’s statement at: http://1.usa.gov/1XxTvR6