Since their conservatorship in Sept. 2008, Fannie Mae and Freddie Mac have undertaken actions that steered 3.9 million troubled homeowners clear of foreclosure or have provided alternatives to mitigate the negative effects of a mortgage default.
This is according to a report submitted by their regulator, Federal Housing Finance Agency which primarily reported the Enterprises’ foreclosure prevention actions for the first quarter of 2017 and to date.
Foreclosure Prevention Actions
Fannie and Freddie completed foreclosure prevention actions for 3,882,464 homeowners since Sept. 2008. The bulk of such foreclosure prevention activities went to permanent loan modifications for 2,054,248 homeowners as part of their home retention actions.
The remaining 1,157,214 homeowners were allowed to stay in their homes through (1) repayment plans, (2) forbearance plans, (3) charge-offs-in-lieu-of-foreclosure, or (4) Home Saver Advance for Fannie Mae homeowners only.
Fannie and Freddie also completed “home forfeiture actions” such as short sales and deeds-in-lieu-of-foreclosure, as part of their foreclosure prevention activities.
Loan Modifications, Home Forfeitures
For the first quarter, Fannie and Freddie completed 49,104 foreclosure prevention actions, an overwhelming majority pertained to permanent loan modifications for 31,927 homeowners. Twenty-nine (29%) of all loan modifications in 1Q17 reduced borrowers’ monthly payments by more than 30%.
Of the total loan modifications, the share of “extend term only” was 40% during 1Q17 and was attributed to rising home prices that increased the equity store in homes as well as the expiration of the Home Affordable Modification Program® (HAMP®).
The second highest share was “reduce rate & extend term” (33%), followed by requests for “reduce rate, extend term & forbear principal” (20%), and lastly, “reduce rate only” (1%).
As of 1Q17, a fifth of the total loans modified during the first quarter of 2016 missed two or more payments a year after they were modified.
For the first quarter of 2017, 4,936 short sales and deeds-in-lieu-of-foreclosure were completed, bringing the total to 671,002 to date. Between 1Q17 and 4Q16, there was a 9-percent drop in the number of short sales and deeds-in-lieu.
HAMP®, Non-HAMP® Activity
HAMP® was introduced in April 2009 and to date, HAMP® trial modifications have been given to 1,082,378 homeowners. Of this total, 658,192 were granted a permanent HAMP® modification. By the end of the first quarter, 1,597 homeowners were placed in a HAMP trial modification period.
The FHFA said that 95% of all permanent loan modifications completed in 1Q17 were non-HAMP® modifications. That is, 30,395 homeowners were granted permanent loan modifications through Fannie/Freddie’s respective modification program in the first quarter.
Since the program’s inception, 1,298,579 non-HAMP® permanent modifications have been made.
During 1Q17, a total of 19,195 third-party and foreclosure sales were completed, a five-percent increase from 4Q16. In contrast, the number of foreclosure starts (loans that enter into foreclosure) dropped 4% to 50,529 in 1Q17, from 52,393 in 4Q16.
Other 1Q17 Mortgage Performance Highlights
The FHFA foreclosure prevention report also contained the following highlights:
- The number of mortgages in 60 days or more delinquency fell 10% to 377,622 in 1Q17, from 420,709 in 4Q16. This is a record low level since 2008.
- The number of mortgages in serious delinquency (those that are 90 days or more past due) also fell 1.04% in 1Q17 from 1.12% in 4Q16. It also considered the lowest level recorded since April 2008 versus other loan programs per industry average: FHA loans – 4.0%, VA loans – 2.1% and all loans – 2.8%.
- The real estate owned or REO inventory held by the Enterprises fell 8% in 1Q17, to 44,460 as acquisitions outpace dispositions.
Justin McHood is a managing partner at Suited Connector and has been recognized by national media outlets as a financial expert for more than a decade.