At the moment those will mortgages held or guaranteed by Fannie Mae or Freddie Mac are not eligible for mortgage principal write-downs. With falling housing values and continuing sluggish housing market, will that change?
Reportedly, the Administration is pressuring the GSEs to change their policies on mortgage reductions. According to a Wall Street Journal article the Administration is using the Federal Housing Finance Agency to lobby Fannie and Freddie to be more open to doing principal reductions. To date they have approved very few write-downs, particularly for those who are current on their mortgages and homes with a Fannie or Freddie loan or guarantee are not eligible for the HAMP principal reduction program begun last March.
The GSEs have also not yet subscribed to the FHA’s refinance program for under water mortgages. That is another program that the Federal Housing Finance Agency is trying to get the GSEs to accept.
Because Fannie and Freddie underwrite or guarantee almost half of the home loans in the country, getting these mortgage giants to get on the write-down bandwagon is critical to stabilizing home values and eliminating one of the biggest reasons why homeowners default.