According to the FHFA’s second quarter Foreclosure Prevention Report, loan modifications under the Making Home Affordable Program (HAMP) more than tripled from June to August – 66,200 to 202,200.
Report Summary:
Washington, DC – The Federal Housing Finance Agency released its second quarter Foreclosure Prevention Report, which shows that trial loan modifications under the Administration’s Home Affordable Modification Program (HAMP) announced in March are rising steadily.
This development explains why completed loan modifications have slowed. The data was released by Edward DeMarco, Acting Director of the Federal Housing Finance Agency, as part of the report for the second quarter of 2009, which now includes cumulative data from HAMP.
The FHFA report details the actions Fannie Mae and Freddie Mac have taken to prevent foreclosures and keep people in their homes.
For the first time the report includes trial modification volumes from the HAMP announced in March 2009.
“Fannie Mae and Freddie Mac are working with borrowers and servicers to implement the HAMP and lower mortgage payments to keep people in their homes,” said Acting Director DeMarco.
The report shows that of the Enterprises’ 30 million residential mortgages:
- Trial loan modifications under HAMP more than tripled from June to August, from 66,200 to 202,200.
- Completed actions to prevent foreclosure declined by 25 percent to approximately 58,200 during the second quarter as HAMP trial loan modifications replaced traditional loan modifications and repayment plans in process. Completed loan modifications decreased by 13 percent over the prior quarter to 32,300.
- Fifty-four percent of loan modifications completed in the second quarter resulted in borrowers’ payments decreasing by 20 percent or more, compared with only 8 percent one year earlier.
- Short sales increased by 45 percent during the second quarter to 11,700 as the pipeline of serious delinquent loans increased and Freddie Mac increased the delegated authority of servicers to implement short sales.
- As short sales increased and loan modifications declined, completed home retention actions – actions that result in a borrower keeping his or her home –accounted for 82 percent of all foreclosure prevention actions completed during the second quarter, down from 90 percent in the first quarter.
- Mortgage delinquencies continued to increase during the quarter as higher levels of unemployment contributed to new delinquencies. Foreclosure moratoria associated with HAMP have also contributed to the increase in delinquencies as fewer seriously delinquent loans are transitioning to foreclosure.
- Although the Enterprises’ mortgage delinquencies continued to increase during the second quarter of 2009, the rate of delinquency is consistently lower than the industry average. As of June 30, 2009, the percentage of Enterprises’ mortgage loans that were at least two payments past due (60 plus days delinquent) was 3.5 percent, compared with 4.7 percent for VA loans, 7.8 percent for FHA loans and 8.0 percent for the industry average.
“We expect the number of completed loan modifications to increase as homeowners complete the HAMP trial period,” said DeMarco.
“Fannie Mae’s and Freddie Mac’s efforts with servicers and homeowners are critical to preventing unnecessary foreclosures and to keeping people in their homes.”
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The Federal Housing Finance Agency regulates Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks. These government-sponsored enterprises provide more than $6.3 trillion in funding for the U.S. mortgage markets
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Mortgage News Daily: Delinquencies Still On The Rise, GSEs Reducing Portfolio Risk
Fannie Mae and Freddic Mac’s portfolios increased by a net of 58,000 loans or 0.2 percent during Q2 of 2009 as they took in new loans through purchases and issuances at a greater rate than they liquidated loans. Curently, the two GSEs have a total of 30.4 million loans under service.
Mortgage delinquencies in their portfolios are continuing to increase:
- 30 days delinquent increased by 11 percent during the second quarter to 682,000
- 30-59 days late rose 20 basis points to 2.2 percent of all loans.
- 60 days or greater – another 27,000 loans became 60 or more days delinquent. This is an increase of 21 percent, and there are now 1.3 million 60+ day delinquent loans in the portfolios.
Nearly 50 percent of delinquent borrowers cited loss or curtailment of employment as the reason for their problems, compared to 43 percent during the first quarter.
The number of aging delinquencies increased in part because fewer loans transitioned to foreclosure as usually happens around the 90 day delinquency point.
Instead, foreclosure activity is suspended for those borrowers requesting HAMP modifications. Also those loans in the required 90 day trial modification period continue to be reported as delinquent until the trial period is completed.
Servicers are also stretched thin trying work through the backlog of delinquent loans requesting HAMP intervention.
HAMP has not yet been in operation long enough to judge its effectiveness. The first loans to enter the program have only recently emerged from the 90-day trial period so there are no meaningful figures on the trial completion rate or any number on the overall success of the program. With continuing economic weakness and increasing unemployment HAMP and other foreclosure avoidance programs have a tough row to hoe.
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Seeking Alpha: FHFA Restructuring: Agency Blowing Smoke
The FHFA is blowing smoke at us. Their default rate looks good by comparison because they are not recognizing losses. They are just rolling them forward.
They have done $70billion already and now that they have it figured out they will continue the process. How much of the 5% annualized rate should go on top of their stated numbers? Over time, more than half . The Agency default rate is understated in the report as a result.
Most of the restructured loans are from seriously delinquent borrowers. Those in payment default by 90 days. When these loans are restructured they go off of the Delinquent list.
Therefore the more the Agencies restructure, the lower their delinquency rate looks.
Mr. DeMarco said this about his ability to restructure dead mortgages:
With HARP, these barriers have been addressed. Fannie Mae and Freddie Mac today will refinance mortgages they currently hold, even up to a current loan-to-value of 125 percent.
The ‘barriers’ he is referring to are prudent lending standards. Recent data shows that one half of these loans will re-default. If real estate prices do not make a significant recovery, the very high re-default rate will continue.
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