WASHINGTON–Thousands of homeowners will be eligible to have their mortgage balances cut under a plan approved by Fannie Mae and Freddie Mac.
The Wall Street Journal reported that a plan approved by the Federal Housing Finance Agency would mark the first time that Fannie and Freddie will reduce mortgage balances on a large scale for struggling homeowners since the development of the housing crisis.
The Wall Street Journal cited sources that indicated that fewer than 50,000 “underwater” homeowners will likely be eligible. Reportedly, the plan by Freddie Mac and Fannie Mae would also forgive principal only in cases where they determine the companies would lose less money with that option than foreclosure or other foreclosure-prevention methods. In addition, the new program will likely be limited to mortgages whose outstanding principal balance is under a certain dollar amount, people familiar with the matter told the Journal.
NAFCU responded to the plan.
“It is hard to envision a scenario where principal reduction would result in a win-win for the marketplace overall,” said NAFCU Executive Vice President of Government Affairs and General Counsel Carrie Hunt. “NAFCU strongly supports protecting consumers, but principal reduction sets a dangerous precedent. Credit unions have a strong history of doing everything possible to keep members in their homes.”