Fannie Mae and Freddie Mac have adopted a "streamlined" approach to modifying delinquent mortgages that regulators and industry groups hope will be accepted by investors in private-label nonprime mortgage-backed securities.

For borrowers who are 90-days past due and not in bankruptcy, servicers of Fannie and Freddie MBS can reduce the interest rate to 3%, extend the loan up to 40 years and defer payments on part of the principal. The objective is to reduce borrowers' payments to 38% of gross income through a process that is fast and simple and helps homeowners who have seen their credit scores deteriorate and their home equity disappear.

GSE regulator James Lockhart announced the new streamlined modification program and urged private-label securities investors to quickly adopt the program as an industry standard.

"Broad acceptance and effective implementation could stabilize communities and property values," he said. The two government-sponsored enterprises will require their servicers to implement the new modification program by Dec. 15.

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