DOW JONES NEWSWIRES
Mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE) are
offering new refinancing options to homeowners whose loans they own
and will work with loan servicers to help borrowers modify their
loan into a more affordable mortgage.
The two programs launched Wednesday are part of the Obama
administration's "Making Home Affordable" program. They are
designed to significantly expand the numbers of borrowers who can
refinance or modify their mortgages to an affordable payment.
"Potentially millions of homeowners could qualify for and
benefit from these initiatives," said Fannie Chief Executive Herb
Allison.
The government took over both Fannie and Freddie in September
after they ran up billions of dollars in losses and saw their
portfolios suffer amid rising foreclosures and exposure to subprime
mortgages.
Under Fannie's "Home Affordable Refinance" program, which is
similar to Freddie's "Relief Refinance Mortgage" program, borrowers
who have mortgages owned by Fannie and have a solid payment history
on the mortgage can refinance without buying new or additional
mortgage insurance if the loan at the time of the refinance is more
than 80% of a home's value.
The mortgage firms can refinance loans up to 105% of a home's
value, so even borrowers who owe more than their home is worth may
be able to refinance.
Both Fannie and Freddie's programs end in June 2010.
Under the program called "Home Affordable Modification" by both
companies, loan servicers may cut interest rates, lengthen the
payment period or take other steps, such as principal forbearance,
to reduce monthly payments to as low as 31% of the borrower's
pretax income.
Fannie said for homeowners to be considered, the loan must be
for a primary residence, the amount owed on the mortgage must be
less than or equal to $729,750, and the mortgage must have
originated before Jan. 1. Homeowners don't have to be delinquent
with payments to qualify.
Fannie's shares recently traded at 40 cents, up 5.3%, while
Freddie's rose 5.1% to 41 cents.
- By Kathy Shwiff, Dow Jones Newswires; 201-938-5975;
Kathy.Shwiff@dowjones.com