For the Government, a Step Forward on Mortgages
Mortgage giants Fannie Mae and Freddie Mac are going to speed up loan modifications for hundreds of thousands of borrowers, the government announced today.
As we said earlier, some help for homeowners couldn’t come too soon, given all that’s been done for banks, insurance companies, and anyone else with their hands out.
This new effort isn’t as widespread as some housing advocates have been pushing for – it applies only to Fannie and Freddie loans, and there are restrictions on who can qualify – but since the two agencies hold half of all the nation’s mortgages, streamlining modifications is an important move. The government hopes more lenders and servicers will follow suit, the Wall Street Journal says.
I think the most important thing about this latest plan is that it includes paying services to do loan modifications. One holdup in redoing loans has been the lack of financial incentives for servicers, who stand to earn more by foreclosing.
From the Journal:
Servicers are expected to be paid $800 for a successful modification and loan investors are expected to reimburse servicers for certain fees associated with the modification. There will be a 90-day trial period, and if borrowers successfully make payments for those 90 days the modification will be formally approved.
That seems more than fair to me. The government still is working on a more sweeping plan, but this one certainly is a good start, and it’s more help for homeowners than we’ve seen so far.
It’s far too early to call this a trend, and to expect more in the immediate future. But the move pushes forward the slow, incremental progress being made toward more loan modifications, and toward helping more homeowners. Congress passed that $700 billion bailout bill in short order. Helping homeowners clearly is going take longer, with plenty of complications. But it inched ahead a bit more today, and that’s a hopeful sign.