US Extends Limited Reduction of Mortgage Principal for Stressed Homeowners

BY Jim Puzzanghera, LA Times

April 14, 2016

“A top federal regulator announced a long awaited initiative to allow some homeowners facing foreclosure to reduce the principal on their mortgages.  But the plan is limited and comes years after advocated began pushing for much broader relief in the wake of the housing market crash.

The program from the Federal Housing Finance Agency will help about 33,000 people whose mortgages are backed by Fannie May and Freddie Mack, the housing finance companies seized by the government in 2008…

The program is available to homeowners who were at least 90 days delinquent on mortgage payments as of March 1, 2016.  The outstanding principal on the mortgage must be no more than $250,000.00 and the value of the home must be at least 15% less than what is owed on the loan.

The mortgage principal could be reduced no lower than 15% above market value, meaning the homeowner would still be underwater. No more than 30% of the total principal could be forgiven.

Eligible borrowers should expect to hear from their mortgage servicer by December 31.”