Rise in Modifications to Contain Repo Houses for Sale
Government-sponsored enterprises, Federal Home Loan Mortgage Corp. and Federal National Mortgage Association increased by 57 percent the number of loan modifications they initiated in the first quarter of 2009.
The first quarter 2009 Foreclosure Prevention Report released by Federal Housing Finance Agency director James B. Lockhart showed that nearly 37,000 loans were modified to help contain the spread of repo houses for sale in the country.
The first quarter figures was 57 percent higher than the last quarter of 2008 and twice as big as the number of loan modifications made in the first three months the previous year.
According to the report, modifications accounted for 43 percent of efforts to contain the spread of repo houses for sale in the first three months of this year, an increase of 33 percent from the previous quarter.
Meanwhile, modifications with over 20 percent decline in monthly mortgage payments increased by 52 percent during the first quarter of 2009 from 2 percent the same period the previous year.
Completed actions to contain the spread of repo houses for sale, such as modifications, repayment plans or forbearance, showed a substantial increase during the first three months of this year, with nearly 87,000 deals finalized in the quarter. The figures represented nearly 20 percent increase from the previous quarter and twice as many compared with the first quarter 2008 total.
On the other hand, home retention activities which resulted to distressed borrowers remaining in their homes, accounted for nearly 90 percent of foreclosure prevention actions finalized during the first three months of 2009. The figures are consistent with the number of foreclosure prevention actions finalized the previous year.
Freddie Mac and Fannie Mae both owned or guaranteed 56 percent of the total outstanding loans. However, only 22 percent of loans that were seriously delinquent were owned or guaranteed by Freddie Mac and Fannie Mae.
Despite the increase in the number of delinquencies on loans owned or backed by Freddie Mac and Fannie Mae in the first quarter of this year, the delinquency rate was lower than the average rate reported by the whole industry.
By the end of the 2009 first quarter, the percentage of Fannie Mae and Freddie Mac’s loans that were behind 60 days and were in danger of becoming repo houses for sale was 3.6 percentage point, compared with Veterans Affairs loans of 6.1 percent, 10.2 percent for loans owned by the Federal Housing Administration and 9.2 industry average.
