Fed announces Homeownership Preservation PolicyMortgagePress.comFederal Reserve Board, Homeownership Preservation Policy, foreclosures
The Federal Reserve Board has issued its Homeownership
Preservation Policy, which seeks to prevent foreclosures on certain
residential mortgage assets held, owned, or controlled by a Federal
Reserve Bank. Under the new policy, Federal Reserve Banks or their
agents (collectively, Fed Banks) must proactively review their
portfolio of residential mortgage loans that are in danger of
foreclosure to determine whether loan modification is a viable
option by assessing whether borrowers are:
#&8226; At least 60 days delinquent on payments, or
#&8226; In danger of becoming 60 days delinquent due to a
decline in income, an interest rate reset, or other common trigger
event.
Additionally, the modified loan must have an expected net
present value greater than the net present value expected from the
property's foreclosure. If a borrower meets these qualifications,
the Fed Banks will offer that borrower a loan modification
substantially similar to the type of modification offered through
HUD's HOPE for Homeowner's program. If the borrower has both a
senior mortgage and a subordinate mortgage on the same property,
the Fed Banks will either seek to modify both mortgages or
consolidate the loans into a single loan. For those borrowers who
do not qualify for a modification under the policy, the Fed Banks
may (i) offer the borrower a temporary repayment plan, or (ii)
inform the borrower about additional federal assistance available.
The new policy is effective immediately and has already been
applied to assets in connection with JPMorgan Chase's acquisition
of The Bear Stearns Companies Inc.
For a copy of the new Homeownership Preservation Policy, click
here.
