Fannie Mae, Freddie Mac Introduce Plan To Help Homeowners Avoid Foreclosures

Fannie Mae and Freddie Mac, the two large government-sponsored housing companies, rolled out a plan today that would ease requirements for homeowners seeking to modify their mortgage payments, allowing many to remain in their homes and avoid foreclosure.

The program would allow homeowners who are behind on their mortgages by at least 90 days to seek a modification without having to document financial hardship, as they have in the past. That requirement often made it harder for homeowners to get a loan modification that would help them get current on their loans, but the new rules would make it easier to lower their monthly payments, the Los Angeles Times reports:

The streamlined modification program, to be put into effect in July, would reduce monthly payments by about 30% on average, officials said in announcing the program Wednesday.

Eligible borrowers would receive letters explaining the modification offer and specifying the reduced payment. If they made three monthly payments during a trial modification period, the new loan terms would become permanent — without them having to document their financial situations.

The two entities and their regulator, the Federal Housing Finance Agency, have faced criticism for not doing more to help homeowners, especially amid the shortcomings of the Obama administration’s signature housing efforts, the Home Affordable Modification Program (HAMP) and the Home Affordable Refinance Program (HARP). Modification efforts were hurt by banks that often didn’t process those documents as quickly as they processed foreclosures. That has led to wrongful foreclosures and claims of fraud and false documentation, both of which were major elements of the mortgage settlement the federal government reached with large banks last year.

The housing market has improved in recent months, helping the overall economic recovery. Millions of Americans are still underwater on their mortgages or facing the threat of foreclosure. Because Fannie and Freddie collectively back roughly half of American mortgages, this change will help address that problem.

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Chris Christie Vetoes Help For Homeowners In State Plagued By Foreclosures

Our guest blogger is David Sanchez, a Special Assistant with the Center for American Progress Action Fund’s Economic and Housing Policy Teams.

New Jersey is facing a twin crisis of foreclosures and lack of affordable housing, but Gov. Chris Christie (R) recently vetoed two bills that would have brightened the outlook for New Jersey residents struggling to afford homes.

The first bill would have empowered New Jersey’s Housing Mortgage and Finance Agency to purchase foreclosed homes and transform them into affordable housing. In doing so, New Jersey would combat the crime and blight brought about by vacant homes, while also increasing housing opportunities for low- and moderate-income families.

The bill had support not only from housing advocates, but from a broad swatch of businesses. What’s more, it would have been implemented without requiring state appropriations.

The second bill would have improved New Jersey’s program to help unemployed or underemployed homeowners make their mortgage payments. This program, funded by a $300 million grant from the federal government’s Hardest Hit Fund program, has badly underperformed for years: according to the most recent statistics, the program has denied assistance to more than double the number of applicants it has helped, and it has spent less than one twentieth of the funds available (although changes have recently been announced that may improve the program). The bill would have mandated that the program respond to applicants and issue aid more quickly.

Christie’s decision to veto these bills is puzzling, to say the least, given the challenges facing New Jersey’s housing market and families. While the housing market is improving in most of the country, it’s getting worse in New Jersey. New Jersey’s percentage of homeowners who are not current on their mortgages increased the most of any state in 2012, and delinquencies remain especially elevated in areas affected by Hurricane Sandy.

Likewise, New Jersey has the second highest percentage of homes in the foreclosure process, with as many as 150,000 foreclosed homes soon to be on the market.

At the same time, New Jersey faces a dire shortage of affordable housing units, with half of all homeowners and an even larger number of renters facing cost burdens.

Unfortunately, Christie’s inaction on New Jersey’s housing challenges is nothing new. Instead of helping New Jersey homeowners, Christie used all of the state’s share of the landmark National Mortgage Settlement to fill budget holes in the state’s general fund. Christie is also attempting to weaken the process by which New Jersey guarantees that affordable housing will be built in communities across the state.

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