Part one of a multi-part post. Click the Fannie Mae tag to see the rest.
The Payment Reduction Plan (PRP) replaced the HomeSaver Forbearance (HSF) program in Fannie Mae’s Workout Hierarchy as of 31 Oct 09. The goal of the PRP is to allow additional time to identify a permanent foreclosure prevention solution.
**Note: this only affects homeowners with loans backed by Fannie Mae.
If you don’t know whether your loan is backed by Fannie Mae or not, you can check here.
Purpose
The purpose of a PRP is to provide a borrower with temporary payment relief while the servicer and the borrower work together to find the appropriate permanent foreclosure prevention solution.
Under a PRP, the servicer can reduce a borrower’s monthly principal and interest (P&I) payment by up to 30 percent for up to six months.
Background
On April 21, 2009, Fannie Mae announced the HomeSaver Forbearance. HSF is a loss mitigation option available to delinquent borrowers (or borrowers facing imminent default) that do not qualify for the Home Affordable Modification Program (HAMP). Under the terms of HSF, up to 50 percent of the borrower’s contractual monthly mortgage payment (principal, interest, taxes, insurance, and other escrow (PITIA)) can be reduced for up to six months while a permanent solution is explored.
The program was designed to demonstrate borrower willingness to pay a reduced monthly payment while providing additional time to determine a more appropriate permanent solution. The HSF program was retired effective October 31, 2009.
The primary differences between the HSF and PRP are summarized in the table below:
| Feature | HSF Terms | PRP Terms |
| Payment Reduction Amount | Payments can be reduced up to 50 percent of the PITIA at the time the forbearance is implemented | Payments can be reduced up to 30 percent of contractual monthly payments of P&I only |
| Property Type | Only owner-occupied properties are eligible for the program | Includes non-owner occupied properties (investment properties and second homes) |
| Incentive Payment | Paid upon entrance into HSF | Paid upon mortgage loan being brought to a permanent foreclosure prevention solutionThe amount will be in addition to the fee paid for the permanent foreclosure prevention solution |
PRP Eligibility
A mortgage loan is eligible for a PRP if it is a Fannie Mae portfolio mortgage loan or MBS pool mortgage loan guaranteed by Fannie Mae and all of the following criteria are met:
The mortgage loan is a first lien conventional mortgage loan originated no less than six months prior to the PRP effective date, as reported by the servicer and upon receipt of first payment.
- The mortgage loan is in default or is at risk of imminent default
- The mortgage loan is secured by a one- to four-unit property (including investment properties and second homes).
- The mortgage loan is currently not on a forbearance plan.
- The borrower is ineligible for HAMP.
- The borrower has the ability to make reduced monthly payments of at least 70 percent of their contractual monthly P&I payment and a more permanent foreclosure prevention option cannot be readily determined.
- The property securing the mortgage loan is not condemned.
- If the mortgage loan is in active foreclosure, the date of any scheduled foreclosure sale is more than 45 days after the PRP effective date.
- The mortgage loan is not covered by recourse or indemnification agreements.
- Mortgage loans with borrowers in active bankruptcy proceedings are eligible at the servicer’s discretion.
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