FHFA: Use of Interest Rate Reduction Expanded to Help Borrowers with a COVID-19 Hardship Reduce Their Monthly Mortgage Payment

Changes to loan modification terms will help borrowers stay in their homes

Today, the Federal Housing Finance Agency (FHFA) announced changes to loan modification terms for COVID-19 impacted borrowers with mortgages backed by Fannie Mae or Freddie Mac (the Enterprises) needing payment reduction for successful home retention. The updated terms are specifically for borrowers with permanent COVID-19 hardships and respond to the unprecedented nature of the pandemic.

​Flex Modification terms will be adjusted for COVID-19 hardships making interest rate reduction possible for eligible borrowers, regardless of the borrower’s loan-to-value ratio. Previously, only borrowers with mark-to-market loan-to-value (MTMLTV) ratios greater than or equal to 80 percent were eligible for a possible interest rate reduction. MTMLTV is a ratio that compares the balance remaining on the mortgage to the current market value of a home.​

“Allowing more families to qualify for an interest rate reduction will prevent unnecessary foreclosures, help strengthen the Enterprises’ books of business, and make sustainable homeownership a reality for more families currently living with the uncertainty of forbearance,” said Acting Director Sandra L. Thompson.

Today’s action is just the latest step FHFA has taken to benefit homeowners and the mortgage market during the pandemic. FHFA continues to monitor the effect of the COVID-19 servicing policies on borrowers, the Enterprises and their counterparties, and the mortgage market.  FHFA may extend or sunset its policies based on updated data and health risks. Homeowners and renters can visit consumerfinance.gov/housing for up-to-date information on their relief options, protections, and key deadlines.

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