NEW YORK ( TheStreet) -- Fannie Mae ( FNMA) and Freddie Mac will begin offering a simpler loan modification initiative to help troubled borrowers avoid foreclosure, the Federal Housing Finance Agency(FHFA) said on Wednesday. Beginning July 1, servicers will be required to offer borrowers who are behind on their payments by 90 days or more an easy way to lower their monthly payments without requiring financial or hardship documentation.
Borrowers will only have to show willingness to pay by making three on-time trial payments, after which the mortgage will be permanently modified. Documenting income and financial hardship, however, could result in additional savings for the borrower, the FHFA said. While executives at the agencies said the initiative will cut through the paperwork and ease the process, Fannie Mae Senior Vice President Leslie Peeler also warned that "all homeowners must know that we will be using all the tools available to us to screen for potential strategic defaulters." Fannie Mae's guidance letter to servicers also points to plenty of exclusions when it comes to borrower eligibility. Borrowers will have to be no more than 720 days delinquent. Modifications will be available only on first-lien mortgages and only on those mortgages with a loan-to-value ratio of 80% or more. Those whose mortgage was modified two or more times previously will not qualify. Borrowers with mortgages less than 12 months old will also not be eligible for the initative. For the complete list of eligibility requirements for Fannie Mae, click here. For more on Freddie Mac's guidance, click here. The program is available to borrowers with loans owned or guaranteed by Fannie Mae and Freddie Mac. The program expires August 1, 2015.