Government Revamps HAMP Loan Modification Program

In an effort to encourage investors to settle HAMP loan modifications with principal reduction by tripling incentives from 18 to 63 cents on the dollar depending on the loan to value change that would be made by the modification.

Currently, Fannie Mae and Freddie Mac are prohibited form doing loan modifications.  Treasury has told the FHFA that it will pay the same incentives to the GSEs for loan modifications as they are making available to banks and securitized investors if Fannie and Freddie will add principal reduction to their arsenal of loan modification tools.