Part three 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.
PRP Process
The servicer must evaluate the borrower’s financial circumstances to determine an affordable monthly amount that the borrower can contribute towards the mortgage obligation. If the amount of the borrower’s contribution (minus any amounts required for monthly taxes, insurance, and other escrow payments for mortgage loans with escrow accounts) is at least 70 percent or more of the borrower’s contractual P&I payment, then the borrower is eligible for PRP at an amount he or she can afford. The borrower must continue to make taxes, insurance, and other escrow payments during the PRP forbearance period.
If the borrower cannot afford a payment that is at least 70 percent of their current monthly payment then alternative foreclosure prevention solutions must be considered in accordance with the new workout hierarchy (as described below).
When a borrower has been approved for a PRP, the servicer will communicate the terms and conditions of the PRP to the borrower and, when feasible, offer the borrower the opportunity to make payments via Automated Clearing House (ACH); provided that the borrower must not be charged a fee for such ACH transactions.
After a servicer has placed a borrower in a PRP, the servicer must actively work towards finding a foreclosure prevention solution and is encouraged to find one as early as possible during the forbearance period.
Borrowers will not be permitted to remain in a delinquent status with no action by the servicer upon completion of the PRP six-month forbearance period. If the borrower fails to make a payment more than 15 days after it is due during the forbearance period, the servicer determines that a foreclosure prevention solution is not feasible at any point during the forbearance, or a foreclosure prevention solution has not been identified by the end of the forbearance period, the servicer must immediately resume or commence foreclosure.
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