Fannie Mae and Freddie Mac’s position is that they will not agree to a principal reduction in a mortgage modification. So our Florida foreclosure defense and bankruptcy clients are out of luck when their home is worth a lot less than the balance owed. This is their position even after a homeowner has filed bankrutpcy and is no longer personally liable for the underlying debt.
However, a new Director may be appointed to head the FHA soon. And if that happens, principal reductions may soon follow. The nominee, Mel Watts, is presently a member of the House of Representatives. While it is not certain that he would permit principal writedowns, it is something that at least is under consideration. HUD Secretary, Shaun Donovan is asking that bankers support Mr. Watts as FHA Director and to begin the process of winding down Fannie and Freddie. Fannie and Freddie have been responsible for more the 90% of the home mortgage market since the mortgage meltdown.
The current FHA director, Edward DeMarco, is against permitting principal writedowns for GSEs for any loan modifications.
Aparts from GSEs, we are seeing Nationstar agreeing to some principal reductions similar to Ocwen. Both Nationstar and Ocwen are huge buyers of mortgage servicing rights from banks and securitized trusts. We regularly see them pop up as a new servicer in our foreclosure defense cases. And when we do, our clients may benefit from our modification mediation services even if they’d been turned down before.
For more information about mortgage modification, please contact us at Christie D. Arkovich, P.A.