GSE Loan Mods Up 76 Percent in Q4

The ""Federal Housing Finance Agency"":http://www.fhfa.gov (FHFA) submitted its ""fourth quarter report"":http://www.fhfa.gov/webfiles/1655/FPMreport431709.pdf to Congress this week detailing actions the GSEs have taken to prevent unnecessary foreclosures. The report shows a 76 percent increase in loan modifications by ""Fannie Mae"":http://www.fanniemae.com and ""Freddie Mac"":http://www.freddiemac.com from the third to fourth quarters of 2008. All in all, the GSEs made 23,777 loan modifications during the fourth quarter of last year, compared to 13,488 during the third quarter.
According to James B. Lockhart, FHFA director, the data illustrates that post-conservatorship home retention programs are starting to work at the nation's two largest mortgage financiers. Also worth noting is that the uptick in mods comes even before the government's big push for foreclosure prevention, which began as the GSEs' streamlined modification program (SMP), implemented in January, and has now morphed into the federal Making Home Affordable loan mod and refinance programs.
Lockhart said that he expects the new home retention initiatives being put into place to cause loan modifications to accelerate. ""These more aggressive modifications should help lessen re-defaults and better stabilize the housing market and neighborhoods,"" Lockhart said.
The GSEs suspended foreclosure sales and evictions scheduled in December to allow servicers additional time to work with borrowers in foreclosure who were eligible for the SMP. FHFA said the impact of the suspensions caused completed foreclosure sales in December to drop by 77.3 percent. Even with the suspensions in place, the GSEs reported foreclosure sales on 3,711 properties during the last month of 2008, compared to an average of 16,342 foreclosure sales per month for the three months prior.
With adjustments made to account for the suspensions, the month-over-month change in delinquency rates actually decreased for the enterprises' 30.7 million residential mortgages, FHFA said. The month-over-month change in the 60+ days delinquency rate from October to November was 14.39 percent, while the month-over-month change from November to December was 9.31 percent.
The December data submitted by FHFA just may be pointing to a tapering off in foreclosures for the GSEs. When adjusted for the suspension of foreclosure sales, the share of delinquent loans for which the foreclosure process was started in December was 6.46 percent. During 2008, February represented the peak at 9.22 percent. Loans for which the foreclosure process was completed was 1.27 percent in December, after suspension adjustments. During 2008, foreclosure completions peaked in July at 2.89 percent.
Repayment plans continued to dominate the GSEs' workout initiatives, at over 71 percent . Still, modifications, consisting primarily of interest rate reductions, made by the GSEs totaled 8,688 in the month of December. This represents an increase over the 2007 monthly average of 2,884, the November 2008 year-to-date average of 5,420, and the prior three-month average of 6,622. In addition, both short sales and deeds-in-lieu during December were at their highest volumes for the year.
Compared to the prior year, FHFA said, 2008 total loss mitigation actions averaged 18,321 monthly, which was 2.33 times the 2007 average of 7,858.