Help for Homeowners Affected by Natural Disasters
FHFA, Fannie Mae, and Freddie Mac have come together to get the word out about mortgage relief options for those affected by natural disasters. Our goal is to make sure you have time to focus on your safety. Contact your mortgage servicer (the company where you send your monthly payments) as soon as possible to let them know about your current circumstances. The telephone number and mailing address of your mortgage servicer should be listed on your monthly mortgage statement.
Learn about options available for homeowners affected by natural disasters.
Servicing Alignment Initiative
FHFA, jointly with the Enterprises, announced the Servicing Alignment Initiative (SAI) in 2011. The objective of SAI was to develop consistent servicing policies that would help servicers to do a better job of resolving delinquencies in a consistent, efficient, and expeditious manner with the goal of keeping struggling borrowers in their homes whenever possible while minimizing losses to the Enterprises and taxpayers. Under SAI, the Enterprises developed a broad suite of aligned loss mitigation programs that streamline the delivery of loss mitigation solutions to borrowers. The success of these efforts is tracked in FHFA's quarterly Foreclosure Prevention Report which documents the Enterprises’ performance in foreclosure prevention actions for borrowers. The loss mitigation solutions outlined in the reports are currently being re-evaluated and redesigned to address a more stable economic environment.
Current Suite of Loss Mitigation Programs:
The suite of programs detailed below encompasses the core loss mitigation programs currently offered by the Enterprises for borrowers facing financial hardships. This is not meant to be a comprehensive list of every program an Enterprise may offer. The loss mitigation programs listed are solely for Enterprise loans, and different loan options are available for government insured loans (e.g., FHA-insured loans) or for loans that are not owned or guaranteed by the Enterprises. Not all borrowers will be eligible for a particular program, and other terms or conditions may apply.
Repayment Plans
In a repayment plan, past due amounts are added on to the borrower’s mortgage payment to be repaid over several months in order to bring the mortgage current. Repayment plans allow a borrower time to catch up on late payments without having to come up with a lump sum.
Forbearance Plans
Forbearance plans allow a borrower to make reduced mortgage payments or no mortgage payments for a specific period of time. Forbearance may be granted for borrowers in temporary or short-term financial difficulty. At the conclusion of the forbearance period the borrower is required to pay any missed payments or amounts, which is generally achieved with a repayment plan or loan modification.
Payment Deferral
A payment deferral allows a borrower to keep the same monthly payment by moving past-due amounts to the end of the loan as a non-interest bearing balance, due and payable at maturity, sale, refinance, or payoff. Missed tax and insurance payments (escrow payments), may affect the total monthly payment.
Flex Modification
In 2016, FHFA required the Enterprises to develop an aligned post-crisis loan modification program that built on lessons learned from the crisis-era modification programs. The aligned effort resulted in the Flex Modification, announced in December 2016.Flex Modification replaced Standard and Streamlined Modifications. Servicers were required to implement Flex Modification by October 1, 2017. For borrowers who qualify, the new loan terms available under a Flex Modification are determined based on the following steps:
- Capitalize arrearages (such as missed payments)
- Reduction of interest rate to the lesser of the current modification rate or the borrower's rate, for borrowers with mark-to-market loan-to-value (MTMLTV) above or equal to 80% (MTMLTV takes the remaining principal balance, divided by the current home value)
- Term extension to 40 years from the modification date
- Forbear principal if needed to reduce the MTMLTV to 100%, with a maximum forbearance of 30% of the post modification unpaid principal balance (UPB)
- For borrowers who are less than 90 days past due, if the borrower has not achieved a 20% payment reduction and 40% Housing expense-to-Income Ratio (HTI), forbear additional principal until those targets are met, down to 80% MTMLTV, with a maximum of 30% of the post modification UPB
- For borrowers who are 90 days or more past due, Flex Mod provides additional forbearance for borrowers with MTMLTVs above 80% if needed to target a 20% payment reduction
Flex Modification may be offered to eligible borrowers who have submitted a complete application and are less than 90 days delinquent, or to eligible borrowers who have not submitted an application and are at least 90 days delinquent.
Short Sale
Short Sale is a foreclosure alternative where a borrower sells the home for less than the balance remaining on the mortgage. The borrower sells the home and pays off a portion of the mortgage balance with the proceeds. The borrower may be required to pay off the remaining mortgage balance. A short sale allows a borrower to transition out of the home without going through foreclosure. In some cases, relocation assistance may be available.
Deed-in-Lieu
Deed-in-Lieu is a foreclosure alternative where a borrower voluntarily transfers the ownership of the property to the owner of the mortgage in exchange for a release from the mortgage loan and payments. The borrower may be required to pay off the remaining mortgage balance if the value of the property is lower than the amount owed. A deed-in-lieu allows the borrower to transition out of the home without going through foreclosure. In some cases, borrowers may be eligible for relocation assistance.
Guiding Principles for Loss Mitigation
On July 25, 2016 FHFA, the U.S. Department of the Treasury, and the U.S. Department of Housing and Urban Development (HUD) issued a joint white paper entitled, Guiding Principles for the Future of Loss Mitigation: How the Lessons Learned from the Financial Crisis can Influence the Path Forward. The white paper details five key principles for the future of loss mitigation. The key principles set forth in the white paper are:
Accessibility: Providing a simple process for homeowners to seek assistance.
Affordability: Providing modification terms that result in meaningful payment relief.
Sustainability: Offering solutions that resolve the delinquency for the long-term.
Transparency: Ensuring that the process is clear and understandable.
Accountability: Ensuring that there is an appropriate level of oversight.
In 2016, the Enterprises developed the Flex Modification, which is described above, with these key principles in mind.
Retired Loss Mitigation Solutions
Page Last Updated: November 1, 2023