FHFA’s Recent Streamlined Mortgage Incentive Births New Hope for Delinquent Homeowners: How the Miami Heat’s road to redemption and back-to-back NBA championships mirrors that of today’s homeowner struggling to make mortgage payments
About three summers ago, LeBron James announced that he would be “taking [his] talents to South Beach, and play for the Miami Heat.” The Heat’s signing of “The Big 3” (Dwyane Wade, Chris Bosh, and James) prompted James to promise the Heat fanbase, “not one, not two, not three,” but seven NBA Championships.
Unfortunately, the Heat’s first playoff-run with “The Big 3” ended in an unfulfilled promise, as they were bounced by the Dallas Mavericks. Now, with recent back-to-back NBA championships in 2012 and 2013, James and the Heat are well on their way to erasing their 2011 failures and delivering on James’ promise.
Like James, homeowners who have struggled to make good on their promise to pay their mortgages will be provided with an opportunity to refinance under a new initiative starting July 1, regardless of their past transgressions.
The Federal Housing Finance Agency (FHFA) recently announced their Streamlined Modification Initiate (SMI) that will simplify loan modifications and allow troubled borrowers to avoid foreclosure.
The initiative grants delinquent borrowers with little to no equity in their homes an opportunity to refinance their mortgage absent (1) a demonstrative showing of hardship and (2) information documenting their current income, credit rating, or employment situation.
Beginning July 1, servicers of loans backed by Freddie Mac and Fannie Mae will be required to allow eligible borrowers a chance to modify their existing mortgage, without a required showing of hardship.
The FHFA claims borrowers who qualify for a streamlined modification should, on average, save (30) thirty-percent on their current monthly mortgage payments. To qualify for a streamlined modification, borrowers need:
To have a mortgage at least one year old
To be 90 days to 24 months delinquent on their payments
To have a loan-to-value ratio that is equal to, or greater than, 80 percent (i.e. 81 percent)
Loans that have been modified more than twice are not eligible for a streamlined modification under the initiative. Eligible borrowers will be afforded a three-month trial period to make timely modified payments on their mortgage. If the trial period is successfully completed, then the borrower will receive a permanent modification, based on a fixed-interest rate, for 40 years. FHFA asserts that “[a] streamlined modification must have a trial period plan effective date no earlier than August 1, 2013 and no later than August 1, 2015.”
As James and the Heat have all but eradicated the memories of the 2011 season by winning consecutive NBA titles, so too can delinquent homeowners put behind them a nightmarish past by initially completing three timely payments.
Furthermore, an eligible borrower looking to refinance is not required to provide any documentation to the servicer. This is welcomed change from the Home Affordable Modification Program (HAMP), which required the production of documentation of hardship to refinance. However, providing proof of hardship or financial distress could allow for more affordable payments.
For more information on the Streamlined Modification Initiative visit:
Real estate attorney and foreclosure defense attorney, Roy Oppenheim left Wall Street for Main Street, founding Oppenheim Law along with his wife Ellen in 1989 in Fort Lauderdale, Florida, and is vice president of Weston Title and creator of the South Florida Law Blog, named the best business and technology blog by the South Florida Sun-Sentinel. Follow Roy on Twitter at @OpLaw or like Oppenheim Law on Facebook.