For the first time since the housing bubble, Fannie Mae and Freddie Mac (the Enterprises) may soon begin reducing mortgage balances for homeowners. According to an article from the Wall Street Journal (WSJ), the Federal Housing Finance Agency (FHFA) has approved a plan for the Enterprises to reduce the mortgage balances of strained borrowers.
This development comes after years of affirmation by GSE heads that debt reduction was out of the question. Confirming that the plan will be released within the next 30 days, FHFA director Melvin L. Watt also said that any mortgage reduction decisions would have to benefit both bereft borrowers and the Enterprises.
The WSJ report states that less than 50,000 homeowners, whose homes are worth less than what they owe, will possibly qualify for the program. The article further announces that mortgage relief will take place strictly in situations where it costs the Enterprises less money than resorting to foreclosure or foreclosure-prevention.
With millions of underwater homeowners in the U.S., will helping a proportionally minimal 50,000 of them make a significant impact? Rising home prices indicate that the problem of negative equity could be growing; what will be done to account for these loans and help these borrowers?
How do we help the millions of underwater homeowners created by last decade’s housing crisis? Should the FHFA do more to help struggling homeowners, or have they done too much already? And, how can we ensure this issue does not ensue in the future? Please let us know your thoughts by commenting below!