Patrick Rucker, Reuters
Province
WASHINGTON — The regulator for the two largest U.S. mortgage finance companies yesterday unveiled a plan to cut monthly payments for struggling homeowners in an effort to reverse a wave of defaults threatening the economy.
Homeowners who face foreclosure and are spending more than 38 per cent of their income on mortgage payments could have monthly payments reduced by Fannie Mae and Freddie Mac , the head of the Federal Housing Finance Agency said.
“The streamlined modification program complements existing loan-mitigation programs,” FHFA chief James Lockhart said. “We expect that it could significantly increase the number of modifications completed.”
Fannie Mae and Freddie Mac own or insure roughly half of U.S. home loans and the move is expected to provide relief for hundreds of thousands of borrowers.
He said borrowers eligible for the new program could see their mortgage rates cut, life of their loans extended or their principal reduced in an effort to ease their debt burden. He said only borrowers delinquent by 90 days or more would qualify for new loan terms.
The program is the latest in a series of what critics say have been piecemeal and ineffective moves to address the record foreclosure rate and plummeting home prices.
The plan outlined yesterday was conceived in part by Hope Now, an industry group midwifed by U.S. Treasury Secretary Henry Paulson last year to help troubled borrowers stay in their homes.
Hope Now has spurred mortgage finance companies to ease terms for troubled borrowers but those voluntary efforts have not been enough to halt the growing pace of foreclosures.
© The Vancouver Province 2008