Proposal Would Allow Reduction of Interest Rate

Washington, DC, Dec. 21, 2011 -- The regulator for mortgage backers Fannie Mae and Freddie Mac is considering a proposal to allow for a reduction in mortgage debt for homeowners in Chapter 13 bankruptcy, Financial Times reported.

The plan being considered by the Federal Housing Finance Agency would call for Freedie and Fannie to allow bankrupt homeowners who owe more on their housing debt than their homes are worth to pay 0% interest for five years, the report said.

Participation in the program would be subject to approval by bankruptcy judges.

Fannie Mae and Freddie Mac, combined with the Federal Housing Administration' support about 90% of all U.S. mortgages.