Flex Modification

How does it work?

To determine the borrower's new modified mortgage loan terms, the servicer must apply the following steps in the order described below (unless prohibited by law) until the earlier of achieving the 20% payment reduction target or exhausting the steps:

• Capitalizing eligible arrearages into the loan balance (as allowed by law)
• Determining a modified fixed interest rate based on our Servicing Guide requirements (which may result in a lower rate)
• Extending the remaining loan term in monthly increments (not to exceed 480 months from the mortgage loan modification effective date)
• Forbearing a portion of the principal loan balance

Application of the steps may result in some mortgage loans achieving the payment reduction target through interest rate reduction, while other mortgage loans may achieve the payment reduction target by monthly extension of the remaining loan term or via forbearance of a portion of the principal balance of the loan. It is important to note that completion of the steps may occur prior to achieving the payment reduction target. Not all modifications will result in a 20% payment reduction.

After satisfying all requirements of the trial period plan, the borrower’s current monthly mortgage payments are permanently modified as part of the modification in accordance with the Servicing Guide.

Guidance: D2-3.2-06: Fannie Mae Flex Modification
Guidance: F-1-27: Processing a Fannie Mae Flex Modification

Guidance: B-1-01: Administering an Escrow Account and Paying Expenses

*Servicer will discuss options with homeowners and determine eligibility. No documentation required for this discussion.