The government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac have created new reform policies designed to aid certain borrowers who have found themselves behind on housing payments.
As reported by the Los Angeles Times, starting on November 1, new short-sale reform initiatives will allow individuals whose loans have been purchased or guaranteed by Fannie or Freddie to qualify for a short sale if they meet certain criteria. Some of the standards include unemployment, divorce, long-term disability or a natural or man-made disaster.
A short sale happens when borrowers and lenders avoid impending foreclosure by bringing on a new purchaser for the house at what is normally a price well below the amount owed to the lender.
Previously, only homeowners that were seriously delinquent qualified for a short sale. Under the new reforms, borrowers who are current on their mortgage payments have the chance to sell their property.
While the housing market continues to recover, and short sales or foreclosures are common financial hardships, lenders would be wise to invest in loan management software. This will assist in creating payment plans that are beneficial to both parties.
Also, beginning on November 1, Fannie and Freddie will raise their guarantee fees charged to lenders by an average 10 basis points in order to encourage more private capital to fund the market, according to the Federal Housing Finance Agency (FHFA).
"These changes will move Fannie Mae and Freddie Mac pricing closer to the level one might expect to see if mortgage credit risk was borne solely by private capital," FHFA Acting Director Edward DeMarco said to HousingWire.
Even with such initiatives being made to ease the burden on borrowers, lenders should use an amortization schedule for loans to ensure that each payment plan is catered to the needs of each individual homeowner.