Fannie Mae issued a servicing notice on July 18th, 2012 that stipulated its upcoming adjustment to the GSE’s standard modification rate. Fannie Mae’s current modification fixed interest rate is at 4.625%, and will remain at this percentage until August 31st, 2012. The rate is then set to change to 4.25% starting September 1st, 2012, and servicers will be required to employ this appropriate rate for conventional loans.
Fannie Mae's Modification is designed to help borrowers who are ineligible for HAMP, as well as for those who defaulted on a HAMP modification—or a non-HAMP modification under certain circumstances—by changing the terms of their mortgage loans to make them more affordable.
The notice sent out by Fannie Mae stated:
“The terms of Fannie Mae’s standard modifications for conventional mortgage loans require that the modified interest rate be set to the rate established by Fannie Mae. Fannie Mae reviews this modification rate periodically and may adjust it based on market conditions.
“With this Notice, Fannie Mae is adjusting the required interest rate for Fannie Mae standard modifications with a pre-modification mark-to-market loan-to-value (MTMLTV) ratio greater than or equal to 80%. The required modification rate is posted on eFannieMae.com.
“Servicers are strongly encouraged to implement the new modification rate for Fannie Mae standard modifications with Trial Period Plans that are effective on or after August 1st, 2012, but are required to do so for Fannie Mae standard modifications with Trial Period Plans that are effective on or after September 1st, 2012. Servicers are reminded that the interest rate used for the permanent modification must be the interest rate reflected on the borrower’s Trial Period Plan.”
Those Eligible for a Fannie Mae Standard Modification:
- Borrower previously received and defaulted on either a Fannie Mae HAMP modification—or Fannie Mae HAMP Trial Period Plan—or a Fannie Mae standard modification (as defined prior to October 1st, 2011)
- Property may be owner-occupied or non-owner occupied
- Property may be vacant as long as it is not condemned
- Borrower must have a financial hardship—documented in the Uniform Borrower Assistance Form (UBAF), Form 710
- Loan must have been originated at least 12 months prior to the loan modification evaluation date
- Borrower must have verified income—unemployment benefits are not an acceptable source—documented in accordance with the UBAF
- The pre-modification mark-to-market loan-to-value (MTMLTV) ratio must be greater than or equal to 80%
Those Ineligible for a Fannie Mae Standard Modification:
- Borrower previously received a Fannie Mae modification other than HAMP or a standard modification (as defined prior to October 1st, 2011), and became 60 or more days delinquent within 12 months of the modification’s effective date
- The loan is secured by a non-owner occupied property, and is current or less than 60 days delinquent
For more information regarding the Fannie Mae Modification, please visit eFannieMae.com.