Modified Enterprise Loans Continue to Perform Well


The Federal Housing Finance Agency (FHFA), conservator
for Freddie Mac and Fannie Mae (the Enterprises) said on Thursday that, while
modifications of loans tied to the Enterprises declined in the second quarter
of 2011, those modifications continue to be robust.  Voluntary home forfeiture actions, both short
sales and deeds-in-lieu of foreclosure increased as did the pace of REO

The Foreclosure Prevention and Refinance Report issued
by FHFA includes actions taken on Enterprise loans under both the Home
Affordable Modification Program (HAMP) and the Home Affordable Refinance
Program (HARP).  According to the report,
loans modified under HAMP continue to perform better than historical data would

During the second quarter, 135,419 home retention
actions were completed on Enterprise loans compared to 143,977 in Quarter
One.  This included 81,214 loan
modifications, down from 86,201; 45,890 repayment plans – almost a thousand
more than in the previous quarter – and 7,713 forbearance plans, down from
12,601 in Q1.  There were also 602
“charge-offs in lieu,” almost double the earlier activity.   Broken down by Enterprise, 50,043 of the
modifications were Fannie Mae loans compared to 50,043 in Q1 and 30,878 were
Freddie Mac loans, down from 35,158. 

During the second quarter 59 percent of loans modified
received a both a term extension and a rate reduction, 9 percent received only a
term extension and 30 percent received only a rate reduction.  These figures have varied only one or two percentage
points over the last four quarters. 

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

Fannie Mae’s
borrowers have fared slightly better under HAMP than Freddie Mac’s over the
last few quarters.  Sixty-two percent of
its borrowers received both an extension of term and a rate reduction compared
to 54 percent of Freddie Mac’s borrowers and 32 percent of its borrowers
received only a rate reduction compared to 28 percent of Freddie Mac
borrowers.  Freddie Mac was three times
more likely (15 percent) than its sister Enterprise to only extend the term of
the loan.

Fannie Mae was
also more generous than Freddie Mac in the payment reductions it provided to
borrowers.  Fifty-four percent received
payment reductions over 30 percent compared to 42 percent of Freddie Mac
borrowers.  Fannie Mae loans were reduced
by less than 20 percent in 24 percent of cases; Freddie Mac in 28 percent.  Payments were increased for 11 percent of
Freddie Mac borrowers and 3 percent of Fannie Mae’s.

Home forfeiture actions increased to 32,210 during the
quarter, down from 27,554 in the earlier period.    This included 2,727 deeds-in-lieu, up from
1,849 and 29,483 short sales, up from 25,705. 

The Enterprises refinanced approximately 86,000
mortgages through HARP in the second quarter compared to 130,000 in Q1.  This brings the cumulative number of
refinances to 838,400 since the
program began in 2009.

The enterprises’ delinquency rates remain below
industry standards with 3.85 of their loans considered seriously delinquent,
down from 4.02 in the second quarter. 
Foreclosure starts declined from 260,000 to 251,000 quarter to quarter but
early (30 to 59 days) delinquency increased from 1.86 percent to 2.04

The Enterprises acquired 78,485 properties during the
quarter compared to 78,256 in Q1 and disposed of 100,550 compared to
94,441.  At the end of June the inventory
of real estate owned (REO) declined from 218,000 at the end of April to 196,000.  Fannie Mae’s inventory was down from 153,224
properties to 135,719 and Freddie Mac’s declined to 60,599 from 54,159.

Eighty-four percent of the modified loans held by the
Enterprises were current and performing after three months and 77 percent after
six months.  While the universe is
limited, 73 percent were still performing after nine months.   Despite the better terms given to Fannie Mae
borrowers during modification, Freddie Mac borrowers were performing better at
each of the benchmarks by one or two percentage points.

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