Fannie Mae’s Standard Loan Modification Program

Loan Mod

Fannie Mae announced last week that it dropped the interest rate for its standard loan modification program.  The new rate is now 4%–competitive with today’s market rates.

Fannie Mae’s standard loan modification program is an alternative to the federal government’s Home Affordable Modification Program (“HAMP”).  The program is available for homeowners whose mortgage loans are owned by Fannie Mae and who are delinquent on their loana.  Similar to a HAMP loan modification, a borrower must have verified income and a hardship (a reason for needing a loan modification).  Fannie Mae loan modifications are an option for borrowers who do not qualify for a HAMP loan modification or were not able to make payments under a prior HAMP loan modification.

Unlike HAMP, Fannie Mae standard loan modifications require considerably less paperwork.  However, these loan modifications often come with a slightly higher interest rate than HAMP modifications and may not allow for as much principle forebearance.

Fannie Mae  standard loan modifications can be a great option for many struggling homeowners trying to avoid foreclosure.  While the interest rates are often higher than HAMP loan modifications, the advantages of obtaining a permanent modification without the burden of an extensive application process make it a great option for many homeowners.

Homeowners interested in this program should consult their loan servicer to see if they apply.  Generally, this program requires homeowners to make trial payment plans (“TPP”), which usually consist of three modified loan payments prior to receiving a permanent modification.  As with all loan modifications, homeowners should create a paper trail  and consult an attorney if they are not getting anywhere with their lender.