New Payment Reduction Plan (PRP) will be available to investors and owners of second homes.

Fannie Mae has announced that it will start helping out residential investors by offering temporary payment relief, or forbearance, while the servicer and the borrower work together to find the appropriate permanent foreclosure prevention solution.

The new Payment Reduction Plan (PRP) will replace the current HomeSaver Forbearance (HSF), which will be retired on October 31. This will allow investors and owners of second homes to obtain assistance, where before they were generally excluded from any assistance programs. Borrowers must first verify that they’re not eligible for the Home Affordable Modification Program (HAMP) before applying for the new PRP program.

The biggest difference between the two programs, the Home Affordable Modification Program (HAMP) and the Payment Reduction Plan (PRP) is the size of the maximum payment reduction. Under HSF, the homeowner’s payments could be reduced by 50 percent and with PRP the maximum reduction is only 30 percent.

Why the new program? While many are not willing to bear the pain of the investor’s ‘poor decision’ to buy a rental home in the first place, the fact is that many renters are ending up with nowhere to live when the homes they are occupying end up being sold at foreclosure auctions. This has raised a lot of concern in the foreclosure market, with previous suggestions including allowing tenants to stay in homes after foreclosure while they are being marketed for sale as bank-owned, or REO, properties.

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