Fannie, Freddie Announce Loan Modification Program

Bloomberg News reports:

• Fannie Mae and Freddie Mac, the largest U.S. mortgage-finance companies, will accelerate anti- foreclosure efforts with a new loan modification program designed to cut monthly payments for struggling homeowners.

• Fannie and Freddie, operating under a government conservatorship, will target loans in which borrowers are at least 90 days delinquent and have high loan-to-income ratios, officials from the Treasury and the Federal Housing Finance Agency said today at a press conference in Washington. The companies may offer reduced interest rates and longer terms of as much as 40 years to trim monthly payments.

For more, see Fannie, Freddie Boost Effort to Minimize Foreclosures.

In a related story, see Politico: Schumer not satisfied with new loan mod program.

• Sen. Chuck Schumer (D-N.Y.) is not impressed with the new mortgage modification plan unveiled today by industry and the Bush administration. Instead, he said lawmakers need to change the bankruptcy code to allow judges to reduce mortgage payments and keep people out of foreclosure, a proposal that industry fought to defeat several times this past year.(1)

(1) According to Politico, Shumer made the following statement: "These voluntary plans sound nice, but they don't do the job. No amount of incentives for investors can change the fact that a program like this will only really work if Fannie and Freddie hold the whole loan, which is true in too few cases. When the loan is chopped up into a million pieces and any investor can block a modification from happening, a program like this will only scratch the surface of the mortgage crisis. The only viable solution, and it is one we will take up under President-elect Obama, is to modify the bankruptcy code."