Freddie and Fannie Experiencing Flood Of Foreclosure Starts

Despite efforts by Fannie and Freddie to modify loans, foreclosures are flooding the government-sponsored enterprises at an increasing rate. Foreclosure starts on Fannie and Freddie mortgages increased significantly …

Despite efforts by Fannie and Freddie to modify loans, foreclosures are flooding the government-sponsored enterprises at an increasing rate. Foreclosure starts on Fannie and Freddie mortgages increased significantly from 149,000 in Q4 to 243,000 in the first quarter. For more on this, see the following article from HousingWire.

Government-sponsored enterprises Fannie Mae (FNM: 0.64 0.00%) and Freddie Mac (FRE: 0.71 0.00%) reported more than 37,000 mortgage modifications in the first quarter of 2009, 57% more than the volume of modifications seen in the previous quarter.

The modification data, supplied by the enterprises’ conservator, the Federal Housing Finance Agency (FHFA), include modifications conducted through the streamlined modification program, but not the Making Home Affordable Program, as it was still in development at the end of Q109.

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“The use of serious loan modifications by Fannie Mae and Freddie Mac has risen dramatically,” says FHFA director James Lockhart in a statement today.  “As a result, more  homeowners are seeing payments significantly reduced and fewer people will lose their homes.”

Of all completed foreclosure prevention actions in the quarter among Fannie and Freddie’s combined 30m residential mortgages, modifications accounted for 43%, up from 33% of all preventative action in the previous quarter. The degree of payment reduction achieved through modification has also increased, with 52% of all modifications resulting in payment reductions of 20% or more, up from 42% of all mods in the previous quarter. Another 31% of modifications resulted in reductions of 20% or less.

While 16% of modifications resulted in an increased payment — the opposite intention of modification — it still shows an improvement over 25% in Q408 and a significant improvement over 79% in the year-ago period.

As of March 31, 3.6% of the enterprises’ mortgage loans were 60 plus days delinquent. FHFA noted that although the delinquencies among the agencies increased during the quarter, the rate is relatively lower than the 9.2% industry average, 10.2% rate among FHA loans and 6.1% among VA loans.

Foreclosure starts among Fannie and Freddie’s mortgages jumped in the first quarter to more than 92,000 nonprime and more than 151,000 prime, from more than 62,000 and more than 87,000 respectively in the fourth quarter. The hikes in foreclosure starts come after the foreclosure moratoriums in place at the agencies since late last year expired, opening the floodgates for an influx of foreclosure starts.

This article has been reposted from HousingWire. View the article on HousingWire’s mortgage finance news website here.

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