The Federal Reserve Board has issued its Homeownership Preservation Policy, which seeks to prevent foreclosures on certain residential mortgage assets held, owned, or controlled by a Federal Reserve Bank. Under the new policy, Federal Reserve Banks or their agents (collectively, Fed Banks) must proactively review their portfolio of residential mortgage loans that are in danger of foreclosure to determine whether loan modification is a viable option by assessing whether borrowers are:
At least 60 days delinquent on payments, or
In danger of becoming 60 days delinquent due to a decline in income, an interest rate reset, or other common trigger event.
Additionally, the modified loan must have an expected net present value greater than the net present value expected from the property's foreclosure. If a borrower meets these qualifications, the Fed Banks will offer that borrower a loan modification substantially similar to the type of modification offered through HUD's HOPE for Homeowner's program. If the borrower has both a senior mortgage and a subordinate mortgage on the same property, the Fed Banks will either seek to modify both mortgages or consolidate the loans into a single loan. For those borrowers who do not qualify for a modification under the policy, the Fed Banks may (i) offer the borrower a temporary repayment plan, or (ii) inform the borrower about additional federal assistance available. The new policy is effective immediately and has already been applied to assets in connection with JPMorgan Chase's acquisition of The Bear Stearns Companies Inc.
Home Preservation Policy - Click Here to downloand the complete policy.
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