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Mortgage modifications may be offered to those who didn’t qualify under federal programs

Homeowners that are ineligible to receive a mortgage modification loan under the federal Home Affordable Modification Program may receive some aid if their mortgage loan is held by Fannie Mae or Freddie Mac, according to Housing Watch.

Distressed homeowners whose monthly mortgage payments are less than 31 percent of their income may be disappointed to find that they may not qualify for a modification under HAMP. However, Fannie Mae and Freddie Mac may offer modifications that reduce interest and deferred fees, though they will not cut the principal balance owed, Housing Watch reports.

According to the website, the mortgage guarantors are opting for these modifications because they stand to lose more in the event of a foreclosure. Guarantors can expect to see a 10 percent loss for a modification as opposed to a 50 percent loss for a foreclosure, the website said. Housing Watch also reported that experts say that Fannie and Freddie’s decision to provide modifications may be a response to the high number of strategic mortgage defaults, which economists calculate account for one in five foreclosures.

Though the modifications will not reduce the principal balance, Fannie and Freddie hope that a small change in the size of an homeowner’s monthly payment will be significant enough to discourage them from walking away from their homes, the website reports.

As more Americans consciously decide to stop making payments on underwater mortgages, loan companies are looking for alternatives to prevent homeowners from abandoning their homes and leaving guarantors to deal with the financial losses. However, many strategic defaulters claim that without more government aid to lower their payments, they will not continue to make high payments for a home whose value is sinking.