The efforts of Fannie Mae and Freddie Mac to contain foreclosed for sale inventories as of May 31, 2009 under the Streamlined Modification Program of the Federal Housing Finance Agency have been described by FHFA Director James Lockhart in his recent report.
The Streamlined Modification Program was launched in November 2008 under the previous administration and ended in April this year. As this modification program ended, Fannie Mae and Freddie Mac continued helping the federal government by shifting to the Obama administration’s Making Home Affordable Program.
As of May 31, Fannie Mae and Freddie Mac had guaranteed 30 million residential mortgage loans.
In May, the number of completed loan modifications dropped for the second straight month to around 10,400 as Fannie Mae and Freddie Mac shifted to the Home Affordable Modification Program.
Under HAMP, loan modifications are not counted immediately as loan modifications because these modification efforts still have to undergo a trial period of three months to see if borrowers are able to make the modified monthly payments consistently. After borrowers complete the trial period successfully, their loan medications are considered as completed loan modifications.
Out of all foreclosure prevention efforts completed in May, 47 percent were loan modifications. Most of the foreclosure prevention schemes done were extension of terms and reduction of rates.
Meanwhile, the number of short sales completed in May increased by 3 percent to almost 3,700, a substantial increase from the number of short sales completed in May last year. Many borrowers worked out short sales as a foreclosure prevention strategy in order to ensure less damage on their credit records. They believe they can buy another house again when their financial situations improve.
The number of delinquent borrowers increased by around 80,100 in May, with all of them missing payments by two months or more. Mortgage borrowers who are in default by two months or more increased in May by about 7 percent to 1.3 million.
Foreclosure starts increased by 5 percent to almost 90,600. These foreclosures were made on home loans covering non-owner-occupied homes and owner-occupied homes which are already deemed not qualified for modification under HAMP.
The FHFA regulates Freddie Mac, Fannie Mae and the 12 Federal Home Loan Banks spread across the U.S. These government-sponsored financial institutions provide over $6.3 trillion in funds to financial institutions and mortgage markets across the country.
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