I just came across this article today that shows some rather interesting numbers. What’s interesting is that loan modifications for homeowners are up, which, as a result, they’re saying that foreclosure are down. What’s interesting is that shorts sales went UP during the fourth quarter of last year, which proves what I wrote in another post late last year. The fact remains that short sales are a vital part of mitigating loss for banks. We (as investors) are an important part of this process. I also thinks it’s going to be interesting to see what happens with all of the these loan modifications. In my opinion this will help save a certain percentage of homeowners from losing their house to foreclosure, however, I also believe that many of the people that are facing foreclosure today will only postpone the inevitable by initiating a loan modification. I hate to sound negative because I’m not a negative person, but I believe that the vast majority of the loan modifications will turn into foreclosures eventually anyway. But you should read for yourself and come to your own conclusion… Enjoy!
Fannie Mae and Freddie Mac Helping More Homeowners – Loan Modifications Increasing
loans-webRISMEDIA, April 17, 2009-Fannie Mae and Freddie Mac modified nearly 24,000 loans during the fourth quarter of 2008, an increase of 76% over the third quarter. The modifications, along with the suspension of foreclosures that began November 26, reduced the number of foreclosures by nearly 27% during the quarter, according to data released by James B. Lockhart, Director of the Federal Housing Finance Agency (FHFA), as part of the Foreclosure Prevention Report for the fourth quarter for 2008.
The FHFA report details the actions Fannie Mae and Freddie Mac have taken to prevent foreclosures and keep people in their homes. It analyzes data provided by the companies with adjustments to account for the impact of the foreclosure suspension. The suspension, originally set to end Jan. 9, 2009, was later extended to Jan. 31, 2009.
“Fewer homeowners are losing their homes as a result of the foreclosure prevention efforts,” said Director Lockhart. “We expect the numbers of those getting relief to grow further as the Making Home Affordable program picks up speed in coming months.”
The foreclosure prevention options include forbearance plans, payment plans, delinquency advances and loan modifications. Workout options that led to resolution of delinquent accounts, which means the account was either reinstated or removed from the portfolio, increased 15% in the last quarter of 2008.
The report shows that as of Dec. 31, 2008, of the Enterprises’ 30.7 million residential mortgages:
• Modifications represented 34.0% of fourth quarter loss mitigation actions up from 22.2% of the third quarter.
• Completed payment plans represented 19.0% of fourth quarter loss mitigation actions compared to 24.2% of the third quarter.
• Short sales represented 8.9% of fourth quarter loss mitigation actions compared to 7.7% of third quarter.
• Deeds in lieu represented 0.8% of fourth quarter loss mitigation actions compared to 0.7% in the third quarter.
As a result of increased loss mitigation efforts and the foreclosure suspensions, the overall loss mitigation performance ratio (loss mitigation actions as a percentage of mortgages for which foreclosure was likely) for mortgages serviced on behalf of Fannie Mae and Freddie Mac, increased from 55% during the third quarter of 2008 to 65.7% in the fourth quarter. For prime loans, the ratio increased from 45.1% to 54.2%, and for nonprime loans from 64.7% in the third quarter to 75.3% in the fourth quarter.
Suspensions gave servicers more time to work with borrowers in foreclosure who were eligible for the Streamlined Modification Program introduced in early November 2008. The impact of the suspensions caused December 2008 numbers for completed foreclosure and third-party sales to decline and for total loans, 60-plus, and 90-plus-days delinquent loans to increase.
When adjusted to account for foreclosure suspensions, the month-over-month change in the delinquency rates decreased. The month-over-month change in the 60-plus-days delinquency rate from October 2008 to November 2008 was an increase of 14.39%. The month-over-month change from November 2008 to December 2008 was an increase of 9.31%.
For more information, visit www.fanniemae.com or www.freddiemac.com.
2 responses so far ↓
1 Brian Kurtz // Apr 20, 2009 at 2:38 pm
That letter is just smoke and mirrors.
Did you notice how they snuck the ” along with the suspension of foreclosures that began November 26″ part in there?
It was the foreclosure SUSPENSION that brought foreclosures down significantly, not loan mods. That suspension kicked in Nov 26th too…if they had flipped that switch on Oct 1st you’d have had a 50% reduction in foreclosures for the quarter.
Bad news for homeowners is that with the suspension lifted a flood of homes are pouring into the foreclosures process again. Also, the signs are showing that more than 1/2 of all loan mods are going to go back into default in the near future. A loan mod is like putting a band-aid over a shotgun wound.
There are two solutions to this problem right now:
1) Create Jobs – it doesn’t matter if you cut everyones rate to 4% on their mortgage. If people have no job they don’t pay anything on the mortgage…at all.
2) Lift Loan Limits for Investors – plenty of investors would buy up 100 properties right now if they could get unlimited mortgages with 10% or less down. Rents are NOT down. The properties WILL cashflow and there won’t be the risk that they’ll all go back into default again like some people crow about.
If standard investors can just buy houses without playing private money games, business line of credit games, or running around to 40 local banks hoping that they can find one that will lend to them out of portfolio then we’d see some fast changes.
Banks! Keep blocking the investors from buying and watch as this wildfire continues to burn down the values of all the homes you currently have (or will have) in your inventory in 2009-2010.
2 Cory Boatright // Apr 20, 2009 at 11:33 pm
Hey Bro,
It doesn’t surprise me one bit. I agree with Brian. This is postponing the inevitable for most loan modifications. In fact, it really gives many homeowners more of a free ride to not make anymore payments. I believe the number is around 80% of all loan modifications created never even make their first payment. This is great news for short sale investors. The banks are going to be liquidating properties even faster with the foreclosure moratoriums lifted. This year is going to be epic for short sales. It isn’t a question of “if” it’s “when” and get ready because the floodgates are opening.
Remember… be a servant,
Cory Boatright
Loss Mitigation Specialist
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