Although a new plan announced by the White House to streamline loan modifications for mortgages held by Fannie Mae and Freddie Mac, critics contend that it will only help a small portion of homeowners and ignores those with sub-prime and Option ARM loans. From a CNNMoney.com story:
The federal government's plan to streamline modifications of troubled loans held by Fannie Mae and Freddie Mac won't help the majority of people threatened with foreclosure, experts said.
Under a plan unveiled Tuesday, homeowners whose loans are owned or backed by the mortgage finance companies and who are at least 90 days behind can enter a streamlined modification program. Their payments would be adjusted through lower interest rates or longer repayment terms that would total no more than 38% of their monthly household income. In some cases, payment on part of the loans' principal may be deferred, though not reduced.
The interest rate could be lowered to as little as 3% for five years. After that, it would increase by 1 percentage point a year until it hits either the market rate or the original interest rate, whichever is lower, officials said.
Unlike previous federal efforts, participation by servicers is not voluntary. They will now work with eligible borrowers to reach more affordable mortgage payments, using the guidelines laid out Tuesday.
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