Frannie participates in California cramdown program
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Fannie Mae and Freddie Mac (collectively Frannie) will soon participate in California’s Principal Reduction Program (PRP). This reluctant change of heart was prompted by the announced June 2012 removal of the rule requiring lenders to match any funds PRP offers homeowners.
PRP has been around since February 2011 as one of the federally funded efforts of Keep Your Home California, but has seen little bank participation due to the requirement forcing lenders to match any funds PRP provides a homeowner receiving a principal reduction, otherwise known as a cramdown.
To qualify for PRP, the homeowner must have a mortgage both owned and serviced by participating lenders, thus Frannie’s participation is crucial, as it owns 62% of home loans in California, according to the state’s attorney general office. However, even at its best, the program will only be able to provide cramdowns to 9,000 California homeowners due to the minimal federal funding available and lack of lender contribution. California has 2,041,276 homes with a mortgage exceeding the value of the home, according to the most recent data from CoreLogic. Thus, this program will be able to offer cramdown assistance to just 0.45% of all California underwater homeowners.
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About The Author
Carrie B. Reyes
is lead writer in charge of the Real Estate Practice and Due Diligence and Disclosures books.
![house-shelter[1]](http://firsttuesdayjournal.com/wp-content/uploads/house-shelter1-106x75.jpg)
I can’t believe you guys at First Tuesday. Just another liberal attitude, and another example of rewarding those who least deserve it. What about buying down the mortgage balances of those homeowners who have remained current and paid their mortgage faithfully? The majority of homeowners who are upside down lied about thier income and assets in order to purchase more house than they could afford. And many of them stole the equity from their homes as they refinanced and took the cash out. These loosers have already been more than rewarded for their dishonesty, and you want to reward them even more. When the housing market turns around these jokers will again make out as they sell their homes and again make a profit. But the poor person who didn’t get this stupid tax payer gift, along with the taxpayers funding this program, will be the loosers.
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Not so, there are lot of people who were stupid buyers in that mkt as they put 20% down and are paying mortgage because it is morally right thing to do. I did not take money out and did not lie to get loan. I can make the payment. But how long those millions of people like me will pay on negative equity home. I may not recover my down payment even if I get cramdown. but, I would have money to spend/ contribute to economy if I know that I am paying to own a home without negative equity. So, money would go to consumer economy and not to banks that continue to gamble same way they were before crisis e.g JP Morgan recent hedging.
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