Fannie Mae and Freddie Mac Roll Out “Flex Modification” Program: Help or Cover-Up?

By the Lending Lies Team

Fannie Mae and Freddie Mac have introduced a new loan modification option called Flex Modification. This program replaces HAMP (Home Affordable Modification Program), the Standard Modification, and the Streamlined Modification.

On paper, it’s designed to reduce monthly payments for troubled borrowers. In practice, it may also serve another purpose: to paper over defective loans and questionable paperwork that have plagued the mortgage industry since the financial crisis.

How Flex Modification Works

• Launch: Began in March 2017, mandatory for servicers starting October 1, 2017.

• Goal: Lower monthly mortgage payments by about 20% and target a 40% Housing Expense-to-Income (HTI) ratio.

• Streamlined Process: Requires far less paperwork than HAMP. Borrowers who are more than 90 days delinquent don’t have to provide any documentation at all.

This shift addresses a major criticism of HAMP — the paperwork nightmare. Applications were often “lost” by servicers who had little incentive to modify when foreclosure was more profitable.

Key Differences from Prior Programs

• HTI ratio reduced from 55% → 40% for borrowers under 90 days delinquent.

• Principal must be forborne down to 100% MTMLTV (mark-to-market loan-to-value), compared to 115% under previous rules.

• No amortization option for borrowers with MTMLTV below 80%.

• Principal forbearance capped at 30% of unpaid principal balance.

Eligibility

To qualify, borrowers must:

• Have a loan owned/guaranteed by Fannie Mae or Freddie Mac.

• Be at least 60 days delinquent (or in imminent default if owner-occupied).

• Submit a Borrower Response Package (unless 90+ days delinquent).

• Demonstrate an eligible hardship and verify income.

• Have a mortgage originated at least 12 months before the evaluation date.

Not eligible: FHA, VA, or USDA loans; recourse loans; second homes/investments under 60 days late; loans modified 3+ times; loans in active short sale/deed-in-lieu; or those already under other modification programs.

The Bigger Picture

On the surface, Flex Modification may look like relief. But here’s what homeowners need to know:

• Servicer Incentives Still Favor Foreclosure: Modifications pay servicers little compared to foreclosure windfalls. Will they really process applications fairly?

• Possible Legal Waivers: Many modification agreements contain hidden clauses that limit homeowners’ ability to sue for fraud, defective assignments, or chain-of-title issues.

• Encouraging Delinquency: Because terms improve after 90+ days of default, some borrowers may deliberately fall behind to qualify — a dangerous gamble.

• “Fixing” Broken Loans: By modifying loans with flawed documentation, the GSEs may be wiping the slate clean — not for the borrower’s benefit, but to protect themselves from liability.

What It Really Means for Homeowners

Flex Modification could lower monthly payments and help some families stay in their homes. But it also raises serious questions:

• Is this genuine relief, or just a “runway greasing” program like HAMP, designed to clear bad loans off the books?

• Are borrowers trading away legal rights in exchange for temporary payment reductions?

• Why are so many loan servicers quietly exiting the market while Fannie and Freddie push these programs?

Bottom Line

If you are facing foreclosure, Flex Modification may provide short-term relief. But it is not a cure-all. Review any modification agreement carefully with counsel before signing. The fine print may waive your right to challenge fraudulent documents, false assignments, or chain-of-title defects.

The GSEs may be offering a life raft — but it’s one designed to protect their own ship first.

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Tags: Fannie MAe, flex modification, Freddie Mac, HAMP, LOAN MODIFICATION
Posted in discovery, Fabrication of documents |