A massive first-lien reduction plan would only unjustly force more borrower payments to the banks that hold the second liens.
The Treasury Department has worked with the Federal Housing Finance Agency (FHFA) in order to give more taxpayer dollars to Fannie Mae and Freddie Mac so they could write down the principal for those delinquent first-lien borrowers.
The details on the average second lien sizes are not available as it has always evades analysts.
What scares the FHFA is that it will promote borrowers who have current loan default to take advantage of the program. The current ratio of underwater homeowners who are still paying for their mortgages is 3 in 4.
The bright side is, forbearance programs are available, which would mean that monthly payments will be reduced. Meanwhile, it would be more beneficial and less costly to the government- sponsored enterprises like Fannie Mae and Freddie Mac to extend loan terms.
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