Flex Modification
A mortgage loan modification might be available to borrowers who are experiencing a permanent or long-term hardship and can no longer afford to make regular monthly mortgage payments.
The Fannie Mae Flex Modification offers eligible homeowners mortgage payment relief by extending the term to 480 months and targeting a 20% principal and interest reduction. The modification may also result in a lower interest rate.
How does it work?
After satisfying all requirements of the trial period plan, the borrower’s current monthly mortgage payments are permanently modified as part of the modification.
Allowable arrearages are capitalized into the loan balance (as allowed by law), the term is extended to 480 months from the effective date of the modification, and a new monthly mortgage payment is determined. Some modified mortgage terms also may result in a lower interest rate, and a non-interest bearing principal forbearance due at loan maturity or earlier payoff of the mortgage loan.
The modification typically results in a reduced monthly principal and interest payment, but overall interest paid on the loan will increase (given the extension of the loan term).
The servicer must ensure the borrower’s monthly mortgage loan payments, including trial period payments, include an escrow payment.
Guidance: B-1-01: Administering an Escrow Account and Paying Expenses
Guidance: D2-3.2-06: Fannie Mae Flex Modification
Guidance: F-1-27: Processing a Fannie Mae Flex Modification
*Servicer will discuss options with homeowners and determine eligibility. No documentation required for this discussion.
Resources
Learn the ins and outs of the Flex Modification
Take this self-paced eLearning to find out what adjustments can be made to a homeowner’s loan terms to make their monthly payments more affordable.
