Modified Enterprise Loans Continue to Perform Well

The Federal Housing Finance Agency (FHFA), conservatorrnfor Freddie Mac and Fannie Mae (the Enterprises) said on Thursday that, whilernmodifications of loans tied to the Enterprises declined in the second quarterrnof 2011, those modifications continue to be robust.  Voluntary home forfeiture actions, both shortrnsales and deeds-in-lieu of foreclosure increased as did the pace of REOrndisposition.</p

The Foreclosure Prevention and Refinance Report issuedrnby FHFA includes actions taken on Enterprise loans under both the HomernAffordable Modification Program (HAMP) and the Home Affordable RefinancernProgram (HARP).  According to the report,rnloans modified under HAMP continue to perform better than historical data wouldrnindicate. </p

During the second quarter, 135,419 home retentionrnactions were completed on Enterprise loans compared to 143,977 in QuarterrnOne.  This included 81,214 loanrnmodifications, down from 86,201; 45,890 repayment plans – almost a thousandrnmore than in the previous quarter – and 7,713 forbearance plans, down fromrn12,601 in Q1.  There were also 602rn”charge-offs in lieu,” almost double the earlier activity.   Broken down by Enterprise, 50,043 of thernmodifications were Fannie Mae loans compared to 50,043 in Q1 and 30,878 werernFreddie Mac loans, down from 35,158.  </p

During the second quarter 59 percent of loans modifiedrnreceived a both a term extension and a rate reduction, 9 percent received only arnterm extension and 30 percent received only a rate reduction.  These figures have varied only one or two percentagernpoints over the last four quarters.  </p

Almost half of the Enterprise loans modified duringrnthe second quarter received a payment reduction of 30 percent or more.  This number has remained fairly consistentrnover the last three quarters while the percentages receiving decreases of 1 torn30 percent has steadily increased and is now at 44 percent.  The percentage of homeowners seeing no changernor an increase in payments has shrunk to around 7 percent.   In the three quarters leading up to thernimplementation of HAMP, (Q1, 2, and 3 of 2008) most loans that were “modified”rnactually ended up with payment increases. rnThis was the case with 82 percent, 70 percent, and 53 percentrnrespectively of the loans modified in those quarters.</p

Fannie Mae’srnborrowers have fared slightly better under HAMP than Freddie Mac’s over thernlast few quarters.  Sixty-two percent ofrnits borrowers received both an extension of term and a rate reduction comparedrnto 54 percent of Freddie Mac’s borrowers and 32 percent of its borrowersrnreceived only a rate reduction compared to 28 percent of Freddie Macrnborrowers.  Freddie Mac was three timesrnmore likely (15 percent) than its sister Enterprise to only extend the term ofrnthe loan. </p

Fannie Mae wasrnalso more generous than Freddie Mac in the payment reductions it provided tornborrowers.  Fifty-four percent receivedrnpayment reductions over 30 percent compared to 42 percent of Freddie Macrnborrowers.  Fannie Mae loans were reducedrnby less than 20 percent in 24 percent of cases; Freddie Mac in 28 percent.  Payments were increased for 11 percent ofrnFreddie Mac borrowers and 3 percent of Fannie Mae’s.</p

Home forfeiture actions increased to 32,210 during thernquarter, down from 27,554 in the earlier period.    This included 2,727 deeds-in-lieu, up fromrn1,849 and 29,483 short sales, up from 25,705. rn</p

The Enterprises refinanced approximately 86,000rnmortgages through HARP in the second quarter compared to 130,000 in Q1.  This brings the cumulative number ofrnrefinances to 838,400 since thernprogram began in 2009.</p

The enterprises’ delinquency rates remain belowrnindustry standards with 3.85 of their loans considered seriously delinquent,rndown from 4.02 in the second quarter. rnForeclosure starts declined from 260,000 to 251,000 quarter to quarter butrnearly (30 to 59 days) delinquency increased from 1.86 percent to 2.04rnpercent.  </p

The Enterprises acquired 78,485 properties during thernquarter compared to 78,256 in Q1 and disposed of 100,550 compared torn94,441.  At the end of June the inventoryrnof real estate owned (REO) declined from 218,000 at the end of April to 196,000.  Fannie Mae’s inventory was down from 153,224rnproperties to 135,719 and Freddie Mac’s declined to 60,599 from 54,159.</p

Eighty-four percent of the modified loans held by thernEnterprises were current and performing after three months and 77 percent afterrnsix months.  While the universe isrnlimited, 73 percent were still performing after nine months.   Despite the better terms given to Fannie Maernborrowers during modification, Freddie Mac borrowers were performing better atrneach of the benchmarks by one or two percentage points.</p

All Content Copyright © 2003 – 2009 Brown House Media, Inc. All Rights Reserved.nReproduction in any form without permission of MortgageNewsDaily.com is prohibited.