The Federal Housing Finance Agency has announced a new Streamlined Modification Initiative under which mortgage servicers must now offer borrowers who are 3 to 24 months delinquent a plan to help avoid foreclosure. This new initiative differs from previous government plans like the Home Affordable Modification Program (HAMP) in that borrowers may be approved without providing proof or documentation of financial hardship.
According to Diane Cipollone, director of the Fair Lending Training Program for the National Fair Housing Alliance, the formula used to calculate the new payment is the same as for standard modifications under Frannie and Freddie.
Though the elimination of paperwork may benefit some, the formula is not based on income and affordability and will not necessarily make a significant financial difference to all borrowers. One category of borrowers likely to benefit from the streamlined program includes anyone who fell behind because of “a big interruption in income or some unexpected expense, and but for the arrears, they’re back on track,” Cipollone said.
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