Freddie Mac has announced changes to its loan servicer compensation policies that should help some struggling homeowners avoid foreclosure.
Under the previous guidelines, servicers were compensated for bringing delinquent loans to foreclosure as quickly as possible. In a normal housing market where values are stable or appreciating, foreclosing as soon as possible generally makes business sense. For obvious reasons, the current market does not support such incentives. As a result, Freddie Mac has eliminated compensation based on how quickly a servicer can get a loan through foreclosure.
Some other changes will help even more.
First, Freddie Mac has actually increased its foreclosure timeline for 21 states, including California, to 300 days from a borrower's last payment, and 150 days from the initiation of foreclosure proceedings.
Second, Freddie is doubling the amount of money it will pay to loan servicers for workouts. Under the new guidelines, a servicer will be paid $800 for a loan modification, $2,200 for a short sale or full payoff sale, and $500 for a repayment plan. The amount paid for a deed in liue of foreclosure remains at $250.
Finally, Freddie will now allow previously modified loans to be modified again. This is particularly important for homeowners who were put into loan modifications that increased their payments - these are really repayment plans that were mislabeled.
These changes may help keep people out of foreclosure - what remains to be seen is whether, and how faithfully, the loan servicers participate.
Hopefully this helps our nationwide disaster that is going on. Interesting information.