Freddie Mac Streamlined Mod

Posted by kevin on August 7, 2013 under Foreclosure Blog | Comments are off for this article

Effective July 1, 2013, Freddie Mac came out with its Streamlined Modification program. It applies to loans that are more than 90 days but less than 720 days delinquent. It does not require financial information.

According to the Guide, the servicer is supposed to solicit applications for the program. If an application is filed by the borrower and he or she otherwise qualifies, the servicer obtains a Broker Price Opinion (we generally refer to that as a Comparative Market Analysis (“CMA”), but a BPO is not required for a manufactured home or 2-4 family homes. Once the analysis is completed by the servicer, a trial payment plan is sent to the borrower. If all payments are made timely during the three month trial period, a permanent modification is given.

Say you had a HAMP mod proposal pending on the effective date, and your servicer sends you an invitation to the Streamlined Modification program. You apply for a streamlined mod and get it. You also get a regular HAMP modification. In that case, you get to keep the modification which is most beneficial to you and your family.

As part of the streamlined mod process, Freddie Mac is sending out to servicers a new software package called Workout Prospector which was supposed to be available July 15.

One caveat. Under the streamlined mod program, the servicer is required to offer a mod that is better than what you are currently paying. There is no provision that it must be a minimum of 10% better or that it is tied into your ability to pay. So, if you are currently paying $3000 per month P&I, a reduction to $2950 is deemed an acceptable mod. Clearly, with substantial arrearages, a de minimus reduction such as the example is not going to help anybody.

NO DOC sounds good on its face. Certainly, it is easy. But without your financial data, how does Freddie know whether the mod offer is affordable? Isn’t a predatory loan one that the borrower cannot afford to pay based on his or her income? I am concerned that the streamlined mod program may give us a slew of predatory modifications.

Let’s see how this plays out.