Seriously Delinquent Home Mortgages Continue to Drop for the GSEs

""Fannie Mae"":http://www.fanniemae.com and ""Freddie Mac"":http://www.freddiemac.com have both reported another drop in the share of single-family home mortgages they hold that are 90 or more days delinquent.

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According to Fannie Mae's latest ""monthly summary report"":http://www.fanniemae.com/ir/pdf/monthly/2011/043011.pdf;jsessionid=RP4E3L2ADYIFNJ2FECISFGQ, the company's serious delinquency rate fell 17 basis points in March to 4.27 percent.

Freddie Mac's ""monthly report"":http://www.freddiemac.com/investors/volsum/pdf/0411mvs.pdf shows that its seriously delinquent rate decreased 6 basis points to 3.57 percent in April. _(Fannie's reporting of its past-due numbers lags sibling Freddie Mac by one month.)_

Fannie's serious delinquency rate has continued to fall for 12 straight months now, and except for one interruptive increase of a mere two one-hundredths of a percentage point last September, Freddie has also seen its rate decline consistently over the prior 12 months.

A year earlier in March 2010, Fannie Mae’s serious delinquencies stood at 5.47 percent. In April 2010, Freddie Mac’s were at 4.06 percent.

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The ""servicing alignment initiative"":http://dsnews.comarticles/gses-issue-new-servicing-guidelines-for-delinquent-mortgages-2011-04-28 announced by the two mortgage financiers in late April directly addresses the handling of the GSEs’ past-due loans and is expected to speed the resolution process.

Under the new rules, which are expected to take effect later this year, servicers will be required to contact borrowers as soon as they become delinquent and focus solely on remediating that delinquency, according to the companies’ regulator, the ""Federal Housing Finance Agency"":http://www.fhfa.gov (FHFA).

Edward DeMarco, acting director of FHFA, says the GSEs’ aligned policies “should give homeowners a greater understanding of the process and faster resolution by requiring earlier contact, more frequent communication, and prompt decisions.”

Both Fannie and Freddie will pay $1,600 in incentives for each loan workout completed by the servicer within 120 days of delinquency. The incentive amount shrinks significantly the farther into delinquency workout negotiations go.

Fines will be assessed against servicers that do not meet certain timelines laid out in the new guidelines, such as timely evaluation of modification applications as well as delayed foreclosure sales when other alternatives have been exhausted.

Even after foreclosure processing begins, FHFA says financial incentives will be offered to encourage servicers to continue to help borrowers pursue a foreclosure alternative.