Freddie Mac Sets 6.625% Mortgage Modification Rate for Aug. 14

Freddie Mac Raises Flex Modification Rate to 6.625% Effective Aug. 14

Freddie Mac will raise its published mortgage modification interest rate to 6.625% effective Aug. 14, 2026, a 12.5-basis-point increase from the 6.500% rate in effect since June 12.

The change matters primarily to mortgage servicers and financially distressed homeowners being evaluated for a Freddie Mac Flex Modification. The published modification rate is used in determining the terms of certain loan modifications, but it is not a new mortgage rate available to homebuyers or refinancers and does not mean every modified loan will receive a 6.625% rate.

Freddie Mac’s benchmark has now increased by 50 basis points from 6.125% in February. It rose to 6.250% on April 14, 6.375% on May 14 and 6.500% on June 12 before the latest move to 6.625%.

How the 6.625% modification rate works

The Freddie Mac Flex Modification is a loss-mitigation option designed to help eligible homeowners resolve a delinquency and remain in their homes after a permanent or long-term financial hardship. A modification can change a loan’s interest rate, monthly payment, maturity date or other terms.

Under Freddie Mac’s current Flex Modification waterfall, the published rate helps determine how much interest-rate relief may be applied.

For a fixed-rate mortgage, the servicer initially uses the borrower’s existing interest rate. For an adjustable-rate or step-rate mortgage that has not reached its final rate, the preliminary modification rate generally is the greater of the borrower’s current rate or Freddie Mac’s published modification rate, subject to applicable rate caps.

For qualifying loans with a post-modification mark-to-market loan-to-value ratio of at least 50%, a preliminary rate above Freddie Mac’s published rate can then be reduced in increments of 0.125 percentage point until the applicable payment-reduction target is reached or the published modification rate is reached.

That distinction is important: 6.625% can function as a limit on how far the rate is reduced in that portion of the Flex Modification calculation rather than as a universal rate assigned to every borrower.

If interest-rate relief alone does not produce the required payment reduction, Freddie Mac’s modification process can move to additional steps, including extending the loan term and, when applicable, forbearing a portion of principal. The current Flex Modification framework was redesigned under Federal Housing Finance Agency guidance to target a 20% reduction in principal-and-interest payments for eligible borrowers through the incremental use of rate reduction, term extension and principal forbearance.

Principal forbearance does not erase the amount owed. Under Freddie Mac’s rules, interest does not accrue on the forborne principal, but that amount generally becomes payable when specified events occur, such as maturity, sale, refinance or payoff of the interest-bearing balance.

The modification rate is different from Freddie Mac’s headline mortgage rate

The 6.625% figure should not be confused with Freddie Mac’s widely followed Primary Mortgage Market Survey.

As of Aug. 6, Freddie Mac reported that the average rate on a 30-year fixed mortgage was 6.69%, up from 6.66% the previous week. The average 15-year fixed rate was 6.01%. Those figures are based on qualifying conventional purchase-loan applications submitted by lenders and measure conditions in the primary mortgage market.

The modification rate serves a different purpose: it is an administrative benchmark used by servicers when evaluating and structuring certain workouts for existing Freddie Mac loans.

Freddie Mac instructs servicers to use the modification interest rate posted as of the date they determine a borrower is eligible for a Trial Period Plan. Once that rate is used to calculate the trial payment, the same rate must be used for the final modification even if Freddie Mac subsequently changes its published benchmark.

What borrowers should know

A higher published modification rate does not automatically translate into a specific increase in a distressed homeowner’s modified payment. The outcome depends on the borrower’s existing mortgage terms, loan-to-value ratio and how the full Flex Modification waterfall applies.

Freddie Mac says its Flex Modification program is available for eligible conventional first-lien mortgages it owns in whole or in part. Among other requirements, the loan generally must have been originated at least 12 months before the evaluation, and the modification must produce a principal-and-interest payment below the pre-modification amount. Borrower hardship and delinquency requirements also apply.

Borrowers experiencing difficulty making mortgage payments should contact their servicer, which evaluates eligibility and available loss-mitigation options based on the individual loan and borrower circumstances. FHFA notes that alternatives can include a Flex Modification, payment deferral or repayment plan depending on eligibility.

For servicers, the operational deadline is clear: Freddie Mac says the 6.625% modification interest rate takes effect Aug. 14, replacing the 6.500% benchmark that remains effective through Aug. 13.