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GSE Loan Mods Surged After Takeover


Loan modifications carried out by mortgage financiers Fannie Mae and Freddie Mac surged since their government takeover, according to the FHFA’s November Foreclosure Prevention Report released today.

Loan modifications for October and November, which were the first two full months of the converservatorship, increased by 50 percent from the previous two months,” said James Lockhart, FHFA director.

“These data reflect the increased commitment of the servicers and the GSEs to help borrowers in trouble modify their loans to keep them in their homes.”

Which begs the question, what were they doing prior to the takeover? Answer: mainly simple repayment plans.

Loan modifications increased from a monthly average of 2,883 in 2007 to roughly 5,000 a month in linked quarters, then climbed to 5,600 in October and 8,291 in November.

Actual loan mods accounted for 24 percent of all loan workouts in November, up from 16 percent a month earlier and 13.7 percent in September, but nowhere near the 66 percent share in 2007 (that could be attributed to the sharp rise in repayment plans).

Both foreclosure starts and foreclosure sales spiked in October before falling precipitously in November, and will likely fall even further thanks to recent measures to halt such activity.

The loss mitigation ratio, which is total loss mitigation activities (loan mods, payment plans, short sales, charge-offs, etc) divided by the total of loss mitigation activities plus foreclosures completed and third-party sales increased to 61.7 percent in November.

That’s the highest level since June, when it stood at 64.8 percent, and significantly higher than the year-to-date ratio of 55.2 percent.

However, loan delinquencies show no sign of letting up, with both 60+ day and 90+ day lates nearly doubling since March 31.

Fannie Mae to Loosen Guidelines on Rate and Term Refis

Fannie Mae has also announced plans to ease underwriting and appraisal guidelines on rate and term refinances of Fannie Mae owned loans in an effort to allow more troubled borrowers to take advantage of the low mortgage rates currently on offer.

The so-called “DU Refi Plus” loan program will begin on April 4.  Hopefully interest rates will still be low…

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