Fannie Mae, Freddie Mac developing HomeStay Loan Program For Subprime Borrowers in Difficulty
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As foreclosures are speeding up and the majority are for subprime borrowers in Adjustable Rate Mortgages (ARMs), the mortgage industry has been in turmoil. It looks like Freddie Mac, Fannie Mae, the mortgage lenders, and Wall Street have all come together to create a new product that may alleviate the pressure on these borrowers.
The new program they are planning on rolling out is called “HomeStay” and will be designed to help subprime borrowers refinance their high interest adjustable rate mortgages into stable fixed rate mortgages. The option of extending the length of the loans out to 40 years is one of the options on the table.
This is a great way for the public-private Freddie Mac and Fannie Mae to take a market that is out of control and bring some semblance of sanity to it without the government going into full bureaucratic bailout mode that will create more of a mess than it will help.
On Monday, a high-level group of federal officials, bankers and mortgage industry executives met and agreed on a goal of keeping deserving borrowers with high-risk mortgages in their homes, said Sheila Bair, chairman of the Federal Deposit Insurance Corp. Financial institutions making changes to the terms of home loans _ such as extending the initial low, or “teaser” interest rates on adjustable-rate mortgages _ may help ease the distress of borrowers who are making regular payments but facing possible default, Bair said. via BostonHerald.com.
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Comment by Marc Brinitzer on 19 April 2007:
Blogged this topic myself yesterday.
A friend sits on the board of Freddie Mac. In Q2, look for a 50 year interest only that converts after 10 years to a 40 year fully amortizing loan. Pretty gentle in terms of payment adjustments. Now if we can get them to waive the appraisal for rate and term refi’s, maybe we can help some of those under water to keep their homes.
Comment by Fernando on 19 April 2007:
Do you know of any lenders that are doing this
“homestay” program yet? Or is it in the works still? would like to know more about it.
Comment by Tom on 19 April 2007:
Fernando,
I think it is still in the planning stages.
Comment by lance pickens on 12 November 2007:
i am intersseted in the homestay program.