Fannie Mae OK's Loan Mods for Rental Properties

Mortgage giant Fannie Mae has announced creation of the "Payment Reduction Plan" ("PRP") to provide payment relief and foreclosure forbearance for certain struggling borrowers (specifically, owners of investment properties, rental homes and other commercial real estate) who are ineligible for the government's "Home Affordable Modification Program" ("HAMP").

Under "HAMP", the U.S. Treasury Department provides cash incentives for lenders and servicers that succesfully modify loans involving owner-occupied residential property. Under the new "PRP", monetary incentives are now available for modification of loans relating to investment properties and second homes.

The revised plan will provide a borrower payment relief of up to thirty percent (30%)of a commercial borrower's current monthly principal and interest ("P&I") payment and will be offered to borrowers who are either in default or are in imminent danger of default.

As stated on the Fannie Mae website: “The PRP provides a borrower with temporary payment relief while the servicer and borrower work together to find the appropriate permanent foreclosure prevention solution. PRP offers an additional foreclosure prevention solution for borrowers who othewise would be ineligible for the Home Affordable Modification Program (HAMP).”

Fannie Mae further explains: “During the maximum six month period of forbearance, the servicer should work with the borrower to identify the feasibility of, and implement, a more permanent foreclosure prevention alternative. The servicer should evaluate and identify a permanent solution during the first three months of the forbearance period and should implement the alternative by the end of the sixth month.”