Starting this week, borrowers with mortgages backed by Fannie Mae and Freddie Mac who are at least 90 days delinquent will start receiving offers from lenders to lower their mortgage payments, CNN Money reported.
About 1.1 million borrowers are behind on their loans by three payments or more, the news outlet said, citing data from the Mortgage Bankers Association. Although not all of those loans are backed by Fannie and Freddie, CNN Money estimated hundreds of thousands could be offered loan modifications.
Unlike previous foreclosure prevention efforts, the Federal Housing Finance Agency’s Streamlined Modification Initiative will not require borrowers to file any financial paperwork. Lenders will lower payments by extending the term of the loan and reducing the interest rate. Borrowers will have to make the new payments for a three-month trial period before the modification becomes permanent.
Borrowers moving from a 30-year $200,000 loan with a 5.5 percent rate to a 40-year term with a 4 percent rate will reduce the monthly payment to $835 from $1,135 — a $300 difference, CNN Money said.
Source: CNN Money