No Principal Reduction Alternative for GSE Mortgage

by Carrie from Miami, Florida

Ask Kate why there's no principal reduction alternative (PRA) for a government sponsored entity (GSE) mortgage: Are you wondering why Making Home Affordable (MHA) singles out GSE mortgages, aka Fannie Mae and Freddie Mac loans, as NOT eligible for a principal reduction alternative through the HAMP loan modification program?

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Carrie asks Kate Why Fannie Mae Home Loans Don't Receive PRA

Hi Kate, why do underwater mortgages other than Fannie or Freddie backed loans receive Principal Reductions under HAMP? Will Harp 3.0 help us Fannie Mae backed loans?

Kate Answers: Why Don't Fannie Mae Home Loans Receive PRA

***zz-portrait-left.shtml*** Dear Carrie,

You may have heard of Ed DeMarco. He is the acting director of the Federal Housing Finance Agency (FHFA).

In July of 2012, DeMarco lost support among homeowners when he made the arbitrary decision that only non-Fannie and non-Freddie mortgages are eligible under HAMP for principal balance reductions.
In 2008, the FHFA became the conservator for Fannie Mae and Freddie Mac. Once revered as mortgage giants, the ailing institutions are known as government sponsored entities or simply GSEs.

Eligibility for HAMP Principal Reduction Alternative Program

National Mortgage News: No Principal Reduction Alternative for Fannie Mae Mortgages
But backing up, as it stands today (March 6, 2013), if you...
  • Owe more than your home is worth,

  • Live in the property as your primary residence,

  • Obtained your mortgage on or before January 1, 2009,

  • Have a current mortgage payment more than 31% of your gross income,

  • Owe no more than $729,750 on your mortgage,

  • Have a financial hardship,

  • And have sufficient income to support the modified payment...
then you may be eligible for a principal reduction alternative in conjunction with the Making Home Affordable HAMP program.

Oh yes, with one exception! If your home loan is owned by Fannie Mae or Freddie Mac, you are automatically excluded, thanks to Ed DeMarco.

Meet Ed DeMarco

It doesn't surprise me that DeMarco would make such a decision. It seems that the misplaced superiority complex of Fannie and Freddie has gone to his head.

Claiming that the PRA for GSEs would not be good for American taxpayers, he ignores the fact that healthy homeownership leads to spending money to improve properties and neighborhoods, paying property taxes, and contributing rather than becoming a drag on our economy.
HAMP stands for Home Affordable Mortgage Modification Program. The HAMP plan modifies existing mortgage terms in order to create affordable monthly house payments for homeowners with current hardships.

Take Morality Out of Making Home Affordable Program Eligibility

Conversely, HARP refinance loans are limited to borrowers with Freddie Mac and Fannie Mae mortgages. Somehow down the line, GSE borrowers have been tagged by the White House as responsible homeowners. But by default, tagging some homeowners as responsible declares others not responsible.

Keep in mind, few homeowners knew if their mortgages would be backed by government sponsored entities, Fannie Mae and Freddie Mac. I can assure you that the majority of homeowners applying for mortgages did not even know to ask about backing entities.

Yet this attitude of morality by Making Home Affordable has become the basis for program guidelines. And while not popular in the mortgage industry, let's call a spade a spade. Yes... many guidelines are rules. And in this case, rules based on morality.

It's time for his misguided attitude to end. Take morality out of the equation. Quit talking responsible vs what... irresponsible homeowners? Certain lenders lacked contracts to sell mortgages to a GSE. But why should this dub their borrowers as irresponsible homeowners!

HAMP Loan Modifications with PRA - HARP 3 Refinance

But I digress. So I'll end with this. I hope that everyone reading this will take action.

Our elected politicians in Congress must hear from us. We have put them in office and pay them each month to represent us. It's time to let them know as employees on our payroll, they must truly represent homeowners, with and without equity, with and without a Fannie Mae or Freddie Mac mortgage.

This should be a bi-partisan matter. Underwater mortgages are not aware of political parties and struggling homeowners, once the backbone of the economy, deserve better.

Insist on a HAMP mortgage modification program that does not exclude qualified homeowners from a principal reduction alternative.

Insist on a consistent version of the HARP 3 loan that serves homeowners with or without equity, whether or not they have a mortgage sponsored by a government entity.
Don't miss Carrie's initial correspondence with me at Will Fannie Mae Allow True Mortgage Modifications.
Good luck and best wishes,

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My 2nd Hamp Loan Modification
by: Anne from Marietta, GA

Hi Kate, I got approved for the HAMP back in 2010. I recently fell behind on my mortgage payments due to a cut in job hours and income. I am currently applying for a 2nd HAMP.

Do you think it is possible to get approved for a 2nd HAMP. I was already given a foreclosure sale date. I am trying desperately to keep my home. Any advice you may have would be greatly appreciated.

Hi Anne, Kate here and yes, there's hope... This is the point of HAMP Tier Two program which offers a second chance to struggling homeowners.

Go to HAMP 2 Mortgage Modification News for more information.

Best wishes, Kate

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