Last week, Federal Housing Finance Agency (FHFA) Director Mel Watt announced a new program that will help those who are delinquent in their mortgage payments to reduce the overall principal they owe. Homeowners must meet specific qualifications and have a mortgage backed by either Freddie Mac or Fannie Mae. The FHFA estimates that around 33,000 homeowners will be able to benefit from this new program.
While Watt does acknowledge that this program will only help a small number of those struggling under large amounts of debt, it does help balance the FHFA mandate of helping homeowners in a way that does not adversely affect Freddie Mac or Fannie Mae financially.
In order to qualify for the principal reduction, homeowners must be at least 90 days behind on their monthly mortgage payments as of the beginning of March. Their mortgage principal must be under $250,000 and the home’s value has to be at least 15 percent less than the amount they currently owe.
Those who qualify will have their principal reduced, but it must still be at least 15 percent above the property’s market value. What is more, only a maximum of 30 percent of the total amount of principal can be forgiven. This means those who are struggling may actually remain that way, so the program may not provide as much help as some expect.
Those who qualify will receive a notification from their mortgage servicer no later than December 31.