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.

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