Fannie,Freddie Offer Plans To Make Mortgages More Affordable

   DOW JONES NEWSWIRES 
 

Mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE) are offering new refinancing options to homeowners whose loans they own and will work with loan servicers to help borrowers modify their loan into a more affordable mortgage.

The two programs launched Wednesday are part of the Obama administration's "Making Home Affordable" program. They are designed to significantly expand the numbers of borrowers who can refinance or modify their mortgages to an affordable payment.

"Potentially millions of homeowners could qualify for and benefit from these initiatives," said Fannie Chief Executive Herb Allison.

The government took over both Fannie and Freddie in September after they ran up billions of dollars in losses and saw their portfolios suffer amid rising foreclosures and exposure to subprime mortgages.

Under Fannie's "Home Affordable Refinance" program, which is similar to Freddie's "Relief Refinance Mortgage" program, borrowers who have mortgages owned by Fannie and have a solid payment history on the mortgage can refinance without buying new or additional mortgage insurance if the loan at the time of the refinance is more than 80% of a home's value.

The mortgage firms can refinance loans up to 105% of a home's value, so even borrowers who owe more than their home is worth may be able to refinance.

Both Fannie and Freddie's programs end in June 2010.

Under the program called "Home Affordable Modification" by both companies, loan servicers may cut interest rates, lengthen the payment period or take other steps, such as principal forbearance, to reduce monthly payments to as low as 31% of the borrower's pretax income.

Fannie said for homeowners to be considered, the loan must be for a primary residence, the amount owed on the mortgage must be less than or equal to $729,750, and the mortgage must have originated before Jan. 1. Homeowners don't have to be delinquent with payments to qualify.

Fannie's shares recently traded at 40 cents, up 5.3%, while Freddie's rose 5.1% to 41 cents.

- By Kathy Shwiff, Dow Jones Newswires; 201-938-5975; [e-mail]