Fannie Mae retires HAMP option for mortgage payment reductions
Fannie Mae will end its Payment Reduction Plan (PRP), a program designed to give borrowers ineligible for the Home Affordable Modification Program temporary payment relief while the servicer works toward another foreclosure alternative. According to a servicing announcement issued Friday, PRP will end Dec. 31, and any relief given before then must end before July 1, 2011, or within six months. Servicers must still report data to Fannie Mae, and its incentives to those servicers will still be paid on eligible PRPs when foreclosure is prevented. A spokesperson for Fannie said recent volumes in the program were relatively small, and borrowers experiencing hardships such unemployment and problematic drywall, can still be put into regular forbearance plans and extensions. Fannie started PRP Oct. 26, 2009 as a interim for servicers to get borrowers through HAMP. Through it, mortgage principal and interest payments were reduced by up to 30% for qualifying borrowers. It replaced Fannie’s HomeSaver Forbearance program. PRP reduced the payments by 30% rather than the previous 50% under HomeSaver Forbearance, because permanent solutions are closer to 30%, Fannie Mae said at the time. Servicers totaled 171,176 modifications on Fannie and Freddie Mac loans in the second quarter, according to the Federal Housing Finance Agency. Although that was a 24% increase from the previous quarter, the more than 275,00 foreclosure starts still outnumbered those modifications. Fannie Mae did not immediately respond to requests for comment. Write to Jon Prior.