GSEs expand use of rate reductions in loan modifications

On Wednesday, the Federal Housing Finance Agency announced changes to loan modification terms for COVID-19-impacted borrowers with mortgages backed by Fannie Mae or Freddie Mac (the Enterprises) needing payment reduction for successful home retention. The updated terms are specifically for borrowers with permanent COVID-19 hardships and respond to the unprecedented nature of the pandemic.

​Flex Modification terms will be adjusted for COVID-19 hardships making interest rate reduction possible for eligible borrowers, regardless of the borrower's loan-to-value ratio. Previously, only borrowers with mark-to-market loan-to-value (MTMLTV) ratios greater than or equal to 80 percent were eligible for a possible interest rate reduction. MTMLTV is a ratio that compares the balance remaining on the mortgage to the current market value of a home.​

Acting FHFA Director Sandra L. Thompson said in the agency's press release, “Allowing more families to qualify for an interest rate reduction will prevent unnecessary foreclosures, help strengthen the Enterprises' books of business, and make sustainable homeownership a reality for more families currently living with the uncertainty of forbearance."