Freddie Mac announced that the Freddie Mac Flex Modification foreclosure prevention program will replace the Home Affordable Modification Program or HAMP that expires at the end of 2016. Both programs were designed to assist at-risk families reduce their monthly mortgage payments.
HAMP out and new foreclosure reduction put in
Freddie developed the brand new program in alignment with Fannie Mae at the direction of the Federal Housing Finance Agency (FHFA).
According to Freddie Mac, it developed Flex Modification after getting input from a wide variety of industry participants, and it learned lessons from earlier variations of the program.
Overall, Flex Modification should give at-risk eligible borrowers a way to reduce their monthly mortgage payment by 20 %, Freddie says, and a “high proportion” of homeowners that happen to be a minimum of 60 days delinquent will be eligible. Homeowners who are current or less than 60 days delinquent could, in a few instances, also use the modification option.
In July 2016, the U.S. Department of the Treasury, in conjunction with the U.S. Department of Housing and Urban Development (HUD) and FHFA, released a white paper called “Guiding Principles for the Future of Loss Mitigation.” That paper formed the basis for the new program and laid out five factors – accessibility, affordability, accountability, sustainability and transparency – that should form the foundation of future loss mitigation programs.
David Lowman, executive vice president of Freddie Mac’s Single-Family Business, says that Freddie Mac believes the new program “strikes the appropriate balance between borrower relief and economic responsibility.”
Servicers must implement the new program by Oct.1, 2017. In the interim, Freddie Mac’s Standard and Streamlined Modifications will continue to be in place until then. HAMP expires on Dec. 30, 2016.