Fannie Mae is now offering a new commercial loan modification program aimed exclusively at commercial real estate owners who are unable to make their monthly mortgage payments. The new program called the Payment Reduction Plan (PRP) comes as welcome relief to many apartment building, office building and shopping center owners who have seen drastic decreases in vacancies over the past twelve months. These vacancies have seriously impeded commercial property owners’ ability to pay their mortgages. PRP allows commercial owners to negotiate with their loan servicer for up to a 30% reduction on their commercial mortgage payments.
Breaking Down Fannie Mae’s Payment Reduction Plan (PRP)
According to the Fannie Mae website the “The PRP provides a borrower with temporary payment relief while the servicer and borrower work together to find the appropriate permanent foreclosure prevention solution. PRP offers an additional foreclosure prevention solution for borrowers who are ineligible for the Home Affordable Modification Program (HAMP).”
Under the PRP monthly commercial loan payments can be reduced up to 30% off of the total principal and interest only. The program is strictly for non owner occupied and investment properties.
The Fannie Mae website explains that “during the maximum six month period of forbearance, the servicer should work with the borrower to identify the feasibility of, and implement, a more permanent foreclosure prevention alternative. The servicer should evaluate and identify a permanent solution during the first three months of the forbearance period and should implement the alternative by the end of the sixth month.”
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Ted KarschTed has written 66 articles for us.
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{ 9 comments… read them below or add one }
While I’m not a fan of bailouts, given that the government opened the opportunity to residential mortgage holders, it is only fair (and probably wise) to open it to commercial borrowers as well. That said, if lenders aren’t modifying AND if those who are modified still default down the line, what’s the point?
We have checked the referenced Efannimae.com site and PRP pdf and cannot find any reference to commercial loans or property types in the “eligibility” sections. Please advise on where to look (page, paragraph etc…). This is great news if it can be validated.
Regards,
Dave – There are links in the article that point to the page on Fannie’s website.
Those are the links I used but could not find any reference to specific property types for commercial. The PDF provided by Fannie does say non-owner occupied properties but specifies 1 to 4 units as well. Do you know which page the commercial reference is on? Any help would be greatly appreciated.
Ted,
That’s good to know. Do you think this program will do much to subdue that commercial bubble boogie man everyone is talking about?
Justin Pierce
Not to be too persistant but I still cannot find any reference specific to commercial property on those links or the Efanniemae.com site as relates to the topic above. If anyone can direct me elsewhere I would truly appreciate it.
Dave,
I’m with you on this. There are ABSOLUTELY no references to “Commercial Loan Modifications” aside from non owner occupied 1 – 4 units. Unfortunately, the Author’s statements in the article can not be validated. As they say, “If it sounds too good to be true….”
This program looks like its only for investment properties and rentals, which is still a step I guess. Important to note that this plan only has a maximum length of 6 months.
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This is amazing; I’m glad that Fannie is finally stepping up with investment and non-owner occ mods. If you check out the loan workout hierarchy sheet, it really gives good insight into how Fannie looks at loss mitigation.
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