Tags: fannie | freddie | default | twice

Two Time Defaulters at Fannie, Freddie Hit 34 Percent

Friday, 08 Jan 2010 06:16 PM

More than a third of U.S. residential loans modified by Fannie Mae and Freddie Mac early last year were in arrears again after six months, though the default rate has improved, according to the regulator of the two largest mortgage finance companies.

About 34 percent of homeowners with loans guaranteed by the companies modified in the first quarter of 2009 were at least 60 days delinquent, the Federal Housing Finance Agency said in a quarterly report on Friday.

That compares with 39 percent of mortgages going bad after the companies agreed to ease terms of the loans in the last quarter of 2008, the report said.

The re-default measures cover loans modified before the start of President Barack Obama's Home Affordable Modification Program that gives lenders a standard blueprint to ease terms of loans for troubled borrowers.

Both companies have boosted trial modifications under HAMP, though progress is challenged by document collection and as borrowers are found ineligible.

In general, modification efforts have garnered increased scrutiny for spotty successes, and as most do not address the loss of home equity that has become a major cause of defaults.

Even so, efforts to slow foreclosures have reduced distressed sales of homes, allowing the housing market to stabilize in recent months.

The volume of foreclosure starts in the third quarter fell 15 percent compared with the second quarter, the report said.

Analysts are watching the success of the modification plans, since their failure could mean housing inventory could swell, forcing home prices lower again.

Another Obama plan that makes it easier for lenders to refinance loans near or more than the home's value — creating the problem of "negative equity" — are accounting for only a fraction of total refinances, the report said.

In November, Fannie Mae and Freddie Mac refinanced 20,710 loans with loan-to-value ratios between 80 percent and 105 percent, or 9.5 percent of the month's total. They refinanced just 540 loans with loan-to-value ratios between 105 percent and 125 percent in the month.

But another alternative to foreclosure that eliminates the problem of underwater loans ramped up in the third quarter.

Short sales — when a home is sold for less than the balance of outstanding liens, and the debt is wiped out — increased by 39 percent in the quarter, the report said.

© 2017 Thomson/Reuters. All rights reserved.

   
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More than a third of U.S. residential loans modified by Fannie Mae and Freddie Mac early last year were in arrears again after six months, though the default rate has improved, according to the regulator of the two largest mortgage finance companies. About 34 percent of...
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2010-16-08
Friday, 08 Jan 2010 06:16 PM
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