New loan program takes heat for encouraging defaults

The Federal Housing Finance Agency is rolling out a new program designed to help more borrowers reduce their monthly mortgage payments.

Under this program, homeowners who are beyond 90 days late on their mortgages automatically will become eligible for a loan modification. The program will be available only to borrowers whose loans are owned or insured by Fannie Mae or Freddie Mac.

Some financial analysts have expressed concern that the program could encourage other borrowers to deliberately miss payments in an attempt to become eligible. FHFA has offered assurances Fannie and Freddie would take certain measures to screen out strategic defaulters.

A modification would be finalized after the borrower makes three on-time payments at the lower amount.