New rules introduced by Freddie Mac will make it easier for more individuals to obtain mortgage modification. Part of the motivation for these new rules has been to allow more borrowers to qualify in order to receive a mortgage modification in the first place. This is why Freddie Mac announced changes last fall to their modification rules. The purpose is to make the guidelines more standard and allow for a streamlined modification processes.
Changes Now Active for Mortgage Modifications
The official changes went into effect on March, 1st of 2016, making it easier to obtain an affordable mortgage payment post-modification for borrowers. Some of the changes to their existing rules is to alter the ratio calculation for market to market loan to value. In the past, this ratio has meant that some people have been denied despite the fact that they might have met all the other requirements to modify their mortgage.
Streamlined modification terms will also help with turnaround and make mortgage modifications more accessible to many more borrowers. Right now, the market to market loan to value ratio calculation is determined by considering the unpaid principle balance of the mortgage as well as any forbearance amounts divided by the property value of what has been obtained. Forbearance relief is not available if this ratio is less than 115% if the pre-modification market to market loan to value ratio of calculation is at or above 80%.
Changes to the MyCity Program
These standards have now been revised and are active, making it easier to obtain a mortgage modification. In situations where the market to market loan to value ratio is used to streamline modification terms, it also has to consider any arrearages or forbearance amounts that could be capitalized. There are also changes coming down the pike for their My City modification programs.
Established through the Neighborhoods Stabilization Initiative in order to help address communities that have seen the most devastating impacts of the recent housing crisis, My City modification is known as a temporary offering. This modification allows certain individuals up to 60% decreases in their monthly interest and principle payments. It is only available for mortgages within the city of Cook County, Illinois and Detroit, Michigan. The changes made by Freddie Mac are aimed at streamlining modification applications and maximizing the potential modification choices for borrowers who are severely delinquent.
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