If you were hoping to reduce the mortgage amount on your Tucson Real Estate, this information may be of interest to you:
Fannie & Freddie Still Not Ready To Reduce Mortgage Balances Of Borrowers
As issues with troubled homeowners continues to be a major issues in the housing market, the pressure for loan servicers to start to cut the principal balances of mortgage continues to rise. However, it appears that two major players in the mortgage servicing marketplace refuse to make it an option yet, and that is Fannie Mae and Freddie Mac.
Fannie Mae and Freddie Mac, which are controlled by the federal government, do not lower the principal on the loans they back; instead they opt to reduce interest rate and extend the loan terms when modifying loans.
However, the Obama administration, is seeking to have principal balance reductions be considered along with interest rate and term modifications, per their latest statement on the topic this part March.
Interestingly enough though, Fannie and Freddie are both now Government controlled entities and thus it would seem that government would be able to step in make this happen. However, there has not been much response from the government or Treasury specifically on if and when they will force Fannie and Freddie to start reducing mortgage balances.
The main issue however may be the already horrible balance sheets and financial positions that both of the company’s currently have, which would only be further hurt by reducing principal on the loans they back.
If they were to reduce principal balances on mortgages, it would probably mean more taxpayer infused funds into the company and then you are using taxpayer funds to pay off people’s mortgages.
Though servicers are loathe to lower loan balances, a growing chorus of experts and advocates say it’s the best way to stem the foreclosure crisis. Homeowners are more likely to walk away if they owe far more than the home is worth, regardless of whether the monthly payment is affordable. Nearly one in four borrowers in the U.S. is currently underwater.
Meanwhile, a growing number of loans backed by Fannie and Freddie are falling into default. Their delinquency rates are rising even faster than those of subprime mortgages as the weak economy takes its toll on more credit-worthy homeowners. Fannie’s default rate jumped to 5.47% at the end of March, up from 3.15% a year earlier, while Freddie’s rose to 4.13%, up from 2.41%.
So, advocates argue, lowering loan balances now can actually save the companies and taxpayers more money later.
It remains to be seen what the final outcome will be and if and when Fannie and Freddie will begin to reduce principal balances of the mortgages they service. However, as always we will provide additional information and details as they become available.
The information above was received from http://www.strategicmtgaz.com.
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