On November 11, the Federal Housing Finance Agency (FHFA) announced a “Streamlined Modification Program” that applies to Freddie Mac and Fannie Mae mortgage loans, and portfolio loans with participating investors, but will not apply to private-label securitized loans. The Streamlined Modification Program was developed by the FHFA in a joint effort with the Treasury Department, the Department of Housing and Urban Development, Fannie Mae, Freddie Mac, and the HOPE Now Alliance of mortgage servicers.

According to the FHFA, the program targets highest risk borrowers who (i) have missed three payments or more (90 days delinquent) on loans closed on or before January 1, 2008; (ii) own and occupy the property as a primary residence; (iii) owe 90% or more than the home is worth;and (iv) have not filed for bankruptcy.

Qualifying homeowners will have their monthly mortgage payments reduced to an affordable payment, defined as no more than 38% of their household’s monthly gross income, by options including interest rate reduction, loan term extension from 30 to 40 years, and principal deferral. Fannie Mae and Freddie Mac soon will issue specific guidance to their servicers, and implementation will be required by December 15. To encourage participation, servicers will receive a fixed payment of $800 for each loan modified through this program.