Effective October 31, 2009, Fannie Mae will retire its current HomeSaver Forbearance Plan and replace it with the new Payment Reduction Plan (PRP) to help homeowners avoid foreclosure. Under the terms of the new PRP, mortgage servicers will be allowed to reduce a borrower's Principal and Interest (P&I) payment by up to 30% for up to 6 months. The goal is to provide the borrower some temporary relief while working with the servicer to find a permanent foreclosure prevention solution.
To be eligible for this temporary payment reduction, the loan must be owned or guaranteed by Fannie Mae and meet the following minimum requirements:
• Must be a first lien conventional mortgage at least 6 months old
• In default or is at risk of imminent default
• Secured by a 1-4 unit property (owner-occupant, investment, and second homes qualify!)
• Borrower must show ability to make the reduced payment
• Property cannot be condemned
• If in active foreclosure, sale date must be at least 45 days after PRP effective date (no 11th hour requests for PRP!)
Mortgage servicers will receive an incentive fee for a PRP, but under the new plan they will not receive the incentive until after permanent foreclosure prevention has been successfully completed.
Fannie Mae still instructs its mortgage servicers to evaluate each and every distressed borrower for the Home Affordable Modification Program (permanent payment reduction).
This announcement is just further proof that the banks are willing to work with homeowners to avoid foreclosure! In the Greensboro, NC area, our short sale specialist, Kelly Walters, is working with many homeowners to help them find alternatives to foreclosure. To find a Certified Distressed Property Expert in your area, check out www.cdpe.com.