‘Flex Mod’ to Replace HAMP at Fannie and Freddie


Fannie Mae and Freddie Mac will replace the expiring Home Affordable Mortgage Program with a new loss mitigation option called the Flex Modification.

The new program is expected to provide a 20% payment reduction for eligible borrowers, the government-sponsored enterprises said Wednesday. Fannie and Freddie said that “a high percentage” of borrowers who are at least 60 days delinquent on their mortgages would be eligible; in certain cases, those who are less than 60 days delinquent or even current on their loans could also qualify.

“The Flex Modification is an adaptive program that will allow us to continue to assist struggling homeowners in a changing housing environment and simplify the process for servicers to deliver those solutions,” Bill Cleary, Fannie’s vice president of single-family servicing policy, said in a news release. “We believe the program is flexible to adjust for regional and even local differences in housing.”

The Flex Modification incorporates components of HAMP, which expires at the end of 2016, as well as the GSEs’ standard and streamlined modifications and was developed at the directed of the Federal Housing Finance Agency.

“By avoiding the high costs associated with foreclosures, the Flex Modification will result in significant savings for the enterprises and taxpayers. And it will provide borrowers who face permanent hardships with a sustainable modification,” said Sandra Thompson, FHFA deputy director, in a statement.

Servicers will be eligible for the same financial incentives they receive for completing streamlined modifications. For loans that are 120 days or less delinquent, the incentive fee is $1,600. This fee drops to $1,200 for loans that are between 121 days and 210 days delinquent and $400 for loans that are more than 210 days delinquent.

With HAMP, servicers received a $2,100 incentive fee for loans 120 days or less delinquent, $1,700 for loans between 121 days and 210 days delinquent and $900 for loans that are more than 210 days delinquent. HAMP modifications also included borrower incentive payments.

“We believe it strikes the appropriate balance between borrower relief and economic responsibility,” said David Lowman, executive vice president of Freddie Mac’s single-family business.

A July white paper from the Treasury Department, the Department of Housing and Urban Development and FHFA guided the creation of Flex Modification.

HAMP is set to expire at the end of 2016. Servicers will be required to implement the Flex Modification by Oct. 1, 2017.

Between Jan. 1 and Oct. 1, servicers must still evaluate borrowers for Fannie and Freddie’s standard and streamlined modifications. After Oct. 1, Flex Modification will also replace the standard and streamlined offerings.

Life after HAMP has been a question plaguing the industry through the past year. The Mortgage Bankers Association proposed a successor to HAMP called “One Mod” in September based on the work of a task force with representatives from 20 member companies. And in August, the Consumer Financial Protection Bureau called on mortgage lenders, housing finance agencies and investors to work to create loss mitigation programs to replace HAMP upon its sunset.

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