By the time many people consider alternatives to foreclosure, the lender has already begun the foreclosure process. Options like negotiating with the lender become nearly impossible because the foreclosure process is completed before those negotiations have time to produce results.
This is why Fannie Mae has introduced a new program in Florida. The initiative is designed to give homeowners who are behind on their mortgage payments the opportunity to negotiate a lower monthly payment before the foreclosure process begins. While this program should not take the place of working with a bankruptcy attorney to make the best decisions, it may help people stay in their homes and avoid foreclosure.
Currently, people who have defaulted on their home loans do not have the option of mortgage negotiation or mediation until they are already eight months or more behind on their payments. By that point, it is often too late to stave off foreclosure. The new program involves the lender initiating foreclosure mediation when a homeowner is four months or fewer behind on payments. This gives them more time to reach an agreement. Hopefully, more loan modifications will mean fewer people losing their homes.
The new program only applies to loans that are owned or guaranteed by Fannie Mae, but Freddie Mac has announced that they have plans to initiate a similar program in Florida in the near future. These programs are only for Florida home-owners currently. It is likely that lenders chose Florida as a test state for the programs because Florida's foreclosure rate is higher than anywhere else in the country. Currently, nearly a quarter of Florida mortgages are at least 30 days behind. Nationwide, only about 13.8% of home loans are delinquent.
Source: Wall Street Journal, "Fannie Tests Foreclosure-Prevention Plan in Florida," Anthony Klan and Nick Timiraos, 8 Jan 2010