FHFA: GSE Loan Mods Increasing

Mae and Freddie Mac modified nearly 24,000 loans during the fourth quarter of 2008 – an increase of 76% over the third quarter – according to the government-sponsored enterprises' (GSEs) regulator, the Financial Housing Finance Agency (FHFA). The modifications, along with the suspension of foreclosures that began Nov. 26, 2008, reduced the number of foreclosures by nearly 27% during the quarter. A report by [u][link=http://online.wsj.com/article/SB123975395670518941.html?mod=googlenews_wsj]The Wall Street Journal[/link][/u] indicates that with most mortgage companies' foreclosure moratoria now expired, foreclosures are once again on the rise. The FHFA's [u][link=http://www.fhfa.gov/webfiles/2109/4Q08ForeclosurePreventionReport.pdf]fourth-quarter report[/link][/u] details the actions Fannie Mae and Freddie Mac have taken to prevent foreclosures and to keep people in their homes by analyzing data provided by the companies with adjustments to account for the impact of the foreclosure suspension. The suspension, originally set to end Jan. 9, was later extended to Jan. 31. "Fewer homeowners are losing their homes as a result of the foreclosure prevention efforts," says Director James B. Lockhart. "We expect the numbers of those getting relief to grow further as the Making Home Affordable program picks up speed in coming months." The report shows that as of Dec. 31, 2008, of the GSEs' 30.7 million residential mortgages, modifications represented 34% of fourth-quarter loss mitigation actions, up from 22.2% in the third quarter; completed payment plans represented 19% of fourth-quarter loss mitigation actions, compared to 24.2% in the third quarter; short sales represented 8.9% of fourth-quarter loss mitigation actions, compared to 7.7% in third quarter; and deeds-in-lieu represented 0.8% of fourth-quarter loss mitigation actions, compared to 0.7% in the third quarter. As a result of increased loss mitigation efforts and the foreclosure suspensions, the overall loss mitigation performance ratio (loss mitigation actions as a percentage of mortgages for which foreclosure was likely) for mortgages serviced on behalf of Fannie Mae and Freddie Mac increased from 55% during the third quarter of 2008 to 65.7% in the fourth quarter. For prime loans, the ratio increased from 45.1% to 54.2%, and for nonprime loans, from 64.7% in the third quarter to 75.3% in the fourth quarter. The impact of the suspensions caused December numbers for completed foreclosure and third-party sales to decline and for total loans, 60-plus-days delinquent, and 90-plus-days delinquent loans to increase. When adjusted to account for foreclosure suspensions, the month-over-month change in the delinquency rates actually decreased. The month-over-month change in the 60-plus-days delinquency rate from October to November 2008 was an increase of 14.39%. The month-over-month change from November to December 2008 was an increase of 9.31%. The Wall Street Journal, citing the Dow Jones Newswires, also [u][link=http://online.wsj.com/article/BT-CO-20090415-715655.html]reports[/link][/u] that Lockhart contends modifications can continue to ramp up even without legislative provisions for servicer safe harbor. ‘Obviously, the investors don't want [the safe harbor] done, and so my view is that we can work within the present system and get a lot of loan modifications done,’ Lockhart says. Servicers "have more leeway than they're using at the moment" in relation to loan modifications, Lockhart adds. SOURCES: FHFA, The Wall Street


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