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Mortgage Delinquencies Decline for Both Fannie and Freddie

The percentage of single-family mortgage loans counted as seriously delinquent â€" meaning 90 or more days past due â€" has dropped back for both ""Fannie Mae"":http://www.fanniemae.com and ""Freddie Mac"":http://www.freddiemac.com.
[IMAGE] According to Fannie Mae's ""latest monthly status report"":http://www.fanniemae.com/ir/pdf/monthly/2011/023111.pdf, the GSE's seriously delinquent rate dropped to 4.45 percent in January. That's down from 4.48 percent the month before. Twelve months earlier, Fannie's 90-day-past-due rate stood at 5.52 percent.

Freddie Mac's most recent ""monthly summary report"":http://www.freddiemac.com/investors/volsum/pdf/0211mvs.pdf shows its seriously delinquent rate to be 3.78 percent in February, compared to 3.82 percent in January. (Fannie's delinquency stats lag sibling firm Freddie's by one month.) A year earlier, Freddie's 90-day delinquency rate was at 4.20 percent.

Both Fannie and Freddie have posted steady declines in their delinquency rates for three consecutive months.

The regulator of the two government-backed mortgage financiers, the ""Federal Housing Finance Agency"":http://www.fhfa.gov (FHFA), has reportedly been weighing the pros and cons of allowing the GSEs to sell off their nonperforming loans to other secondary market participants. However, deliberations are still just that.

Lawmakers from both chambers are pushing for the two companies to start shrinking their portfolios. Congressmen in the House and the Senate have ""introduced identical bills"":http://dsnews.comarticles/senators-introduce-bill-to-end-taxpayer-support-of-gses-2011-04-04

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that would pull the plug on taxpayer subsidies for the GSEs within two years and force them to reduce the size of the trillion-dollar portfolios down to $250 billion within five years.

Both Fannie and Freddie have recently announced changes to their servicing guidelines that could impact the way delinquent loans are handled.

Fannie Mae issued a ""notice to servicers"":https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2011/svc1103.pdf Monday instructing them “to be judicious when selecting a modification over a repayment plan as the most appropriate option to resolve a delinquency.”

The GSE says a modification should only be considered when a repayment plan is not the appropriate solution to cure the delinquency. Under a repayment plan, the borrower must make payments in addition to regular monthly payments to cure the delinquency.

Fannie stressed that a servicer should consider a repayment plan when the delinquency resulted from a temporary hardship that no longer appears to be hindering the borrower’s ability to meet the payment terms.

Freddie Mac issued a ""new servicing bulletin"":http://www.freddiemac.com/sell/guide/bulletins/pdf/bll1105.pdf late last month stating that its servicers are permitted to postpone foreclosure sales handled by designated counsel as long as the newly scheduled foreclosure sale date is within Freddie Mac’s preset state foreclosure time lines.

Freddie also stated that servicers are prohibited from contracting with attorneys or trustees from which the servicer, any of its affiliates, service providers, or third-party outsourcers receive any financial compensation, either directly or indirectly.

Freddie’s servicers are no longer allowed to require attorneys or trustees to use certain vendors, services, or products, except for connectivity and invoice processing systems. And servicers are prohibited from allowing service providers, vendors, outsourcing companies, or others to participate in, or influence, the selection of foreclosure counsel and trustees, the GSE explicitly stated.

About Author: Carrie Bay

Carrie Bay is a freelance writer for DS News and its sister publication MReport. She served as online editor for DSNews.com from 2008 through 2011. Prior to joining DS News and the Five Star organization, she managed public relations, marketing, and media relations initiatives for several B2B companies in the financial services, technology, and telecommunications industries. She also wrote for retail and nonprofit organizations upon graduating from Texas A&M University with degrees in journalism and English.
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