Fannie Mae Slammed for Setting Poor Industry Servicing Standard

October 29, 2008 No Comments »

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Mortgage financier Fannie Mae “has become a major roadblock” in terms of helping at-risk borrowers find long-term solutions to their housing woes, according to the Neighborhood Assistance Corporation of America (NACA).

The consumer help group, which planned a protest outside Fannie’s headquarters in Washington D.C. today, claims the mortgage giant is setting poor “Accepted Servicing Practices,” adhered to by the rest of the industry.

NACA highlighted a number of failings, including the fact that homeowners must be four months delinquent before receiving a loan workout, and that mortgage rate reductions, when implemented, are limited by the current market rate.

Additionally, the group has found that is nearly all cases, Fannie Mae will not reduce principal balances on delinquent loans, and their primary solution has been the HomeSaver Advance program, that simply puts the unpaid arrearage into a second mortgage, without addressing affordability concerns.

Fannie was also criticized for doing little to delay foreclosure sales and for continuing to offer interest-only home loans, which NACA likens to renting since no home equity is created via mortgage payments.

NACA stressed the importance of Fannie’s actions, given the fact they own or guarantee roughly 30 percent of all outstanding mortgages in the nation.

Last week, forward-thinking FDIC Chairwoman Sheila Bair floated the idea of loan guarantees to encourage more servicers to modify loans for at-risk borrowers.

Loan workouts have increased substantially in recent months, but are still being outpaced by a sharp rise in foreclosure sales.

(photo: mshades)

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