Freddie Mac launched two new mortgage initiatives under President Obama's making home affordable plan.

These are aimed at helping borrowers with Freddie-owned mortgages who are delinquent, at-risk of default, or struggling to refinance as a result of dipping home values.

The two programs include the GSE's relief refinance mortgage and the implementation of the Obama Administration's new home affordable modification program.

"We are proud to support President Obama's bold initiative to restore stability and affordability to the housing market," said Freddie Mac Chairman of the Board John Koskinen. "Today's announcement will give Freddie Mac seller/servicers the tools to refinance borrowers into loans with more affordable terms and provide at-risk borrowers with a potent new loan modification alternative."

The relief refinance mortgage program is aimed at assisting borrowers who are current on their mortgage payments but who would benefit from refinancing into mortgages with terms that better position them for long-term homeownership. To qualify, borrowers should have mortgages owned or guaranteed by the agency.

Eligible borrowers can utilize relief refinance mortgages to improve their position for long-term homeownership success by reducing their current mortgage interest rate or shortening the amortization term.  In the same token, the relief refinance mortgage can be used to replace an adjustable rate mortgage, an initial interest mortgage or balloon/reset mortgage with a 15-, 20- or 30-year fixed-rate mortgage.

The LTV ratio on relief refinance mortgages can be as high as 105 percent of the property's value. 

There is no maximum TLTV/HTLTV ratio, but relief refinance mortgages cannot be used to payoff or reduce subordinate liens. Additionally, existing liens muststill be subordinate to the relief refinance mortgages.

To reduce borrower costs as well as simplify the refinance process, the GSE is encouraging lenders to use home value explorer (HVE) when applicable. HVE is Freddie Mac's automated valuation model. Also, lenders utilizing HVE will not be required to provide the standard representations and warranties on the property's value, condition and marketability.

According to a release from Freddie Mac, lenders are not required to re-underwrite a borrower if the relief refinance mortgage increases their monthly principal and interest payment by 20% or less. 

However, in cases where the change in monthly principal and interest payment is over 20%, borrowers will be underwritten through a simplified process. to increase their success with the new mortgage.

Mortgage insurance is not needed if the existing mortgage does not require it. If not, MI coverage on the new mortgage must be the same as on the original loan.

Freddie Mac relief refinance mortgages are only available for a limited time. Seller or servicers should deliver relief refinance mortgages under contracts taken out on or after April 1 via the firm's on-line selling system.  In addition, relief refinance mortgages should also be originated by June 10, 2010.

Freddie Mac also announced support for the new national home affordable modification program which begins on April 1 and is designed to help more at-risk borrowers achieve successful homeownership by lowering their monthly payments. To qualify, borrowers must have a Freddie Mac-owned or guaranteed mortgage originated on or before January 1, 2009.

To demonstrate its commitment to the Administration's new initiative, the agency has told its servicers to make sure that all possible efforts is made to achieve a successful workout for delinquent borrowers via the new home affordable modification program or Freddie Mac's other workout options before initiating a foreclosure.

Borrowers who are interested in knowing more about the Freddie Mac relief refinance mortgage or the home affordable modification program should contact their mortgage servicer, according to the Freddie release. Homeowners should also contact their servicer to find out if Freddie Mac owns or guarantees their mortgage.

The GSE also said that depending on the level of borrower response to the relief refinance mortgage program and the new modification initiative as well as the number of borrowers who qualify for such refinancings and modifications, the effect of resulting prepayments on certain Freddie Mac mortgage participation certificates could be material.


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