Fannie Mae recently announced the Streamlined Modification Program (SMP) is now available to Fannie Mae servicers and borrowers as an option to help prevent foreclosures. The SMP enables services to change the terms of a loan to reduce a borrower's monthly mortgage payment, including taxes, insurance, and HOA dues, to an amount equal to 38 percent of the borrower's gross monthly income.

The changes in terms may include one or more of the following: Adding the accrued interest, escrow advances and costs to the principal balance of the loan, if allowed by state law; extending the length of the mortgage loan as appropriate; reducing the mortgage loan interest rate; forbearing on a portion of the principal, which will require the borrower to make a balloon payment when the loan matures, is paid off, or is refinanced.

Servicers will be sending modification solicitation letters beginning this month to borrowers believed to be eligible for the program.

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From Wednesday, December 24, 2008 C.A.R. Newsline

Reprinted with permission of the CALIFORNIA ASSOCIATION OF REALTORS®