The Obama administration is trying to convince Fannie Mae and Freddie Mac to join a program run by the Federal Housing Administration (FHA) that allows banks to hand over mortgages if the bank and investors agree to a write-down on the principal. The administration hopes that the participation of the mortgage giants would put additional pressure on other lenders to participate in the FHA program.
Currently, Freddie and Fannie rarely reduce principal balances. According to the Office of the Comptroller of the Currency, only 10 of the 120,000 loans modified during the second quarter of 2010 came with a principal reduction. It is of note that the FHA program is only available to homeowners who are current on their mortgage.
Joshua D. Carlson, Esq.