[Guest post by JD]
The Federal Housing Finance Agency, which oversees mortgage finance giants Fannie Mae and Freddie Mac, announced that borrowers who are more than 90 days late on their mortgages will become automatically eligible for a modification to the terms of the home loan. The goal is to reduce monthly payments.
In the past, to be eligible for a mortgage modification, borrowers had to provide documentation they had a financial hardship. They will no longer be required to do so — though providing such documentation will make borrowers eligible for more substantial monthly savings.
Apparently, government doesn’t learn that their interference in the market leads to some pretty perverse incentives.
In this instance, why bother going through the normal process of refinancing, just skip a few payments and be automatically qualified for refinancing.
Brought to you by the community-organizer-in-chief who sued banks to force them to make loans to people that could not afford them.