Fannie Mae and Freddie Mac (the Enterprises) made changes to enhance their flex modification policies, the Federal Housing Finance Agency (FHFA) announced, expanding assistance for borrowers facing longer-term financial hardships.

The Enterprises’ flex modification is an offering that provides a home retention solution for borrowers facing a permanent hardship and can no longer afford to make their regularly monthly payments, the agency explained. The announced changes will allow servicers to lower a borrower’s monthly payment by reducing the borrowers interest rate (if eligible); extending the mortgage term; and forbearing principal for borrowers with a mark-to-market loan-to-value ratios greater than 50 percent. Servicers are expected to apply these steps incrementally to achieve a 20 percent principal and interest payment reduction, FHFA added.

“The Enterprises have completed over half a million modifications through their flex modification offerings since they were implemented in 2017, helping struggling borrowers throughout the country,” FHFA Director Sandra Thompson said. “The flex modification enhancements will support sustainable homeownership by allowing more eligible borrowers facing hardships to remain in their homes by achieving a meaningful mortgage payment reduction in the current environment of elevated interest rates and home prices.”

According to the lender letter sent out by Fannie Mae, “as early as Nov. 1,” but no later than Dec. 1, servicers should determine the borrower’s new modified mortgage loan terms for a flex modification in accordance with these changes.