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Fannie Mae’s and Freddie Mac’s Increased Loss Mitigation Efforts Pay Dividends

avoid-foreclosureIncreased loss mitigation efforts on the part of Fannie Mae and Freddie Mac resulted in 63,593 foreclosure prevention actions in the second quarter of 2015, bringing the total of such actions to more than 3.5 million since the conservatorships began in September 2008, according to the FHFA's Foreclosure Prevention Report for Q2 2015.

Of those 3.5 million foreclosure prevention actions since 2008, more than 2.9 million have been home retention actions, according to FHFA. Of the home retention actions, more than 1.8 million were permanent loan modifications. About 31 percent of those permanent loan modifications helped reduce homeowners' monthly payments by 30 percent or more. The percentage of loan modifications with principal forbearance held steady at 19 percent from Q1. As of the end of Q2, about 18 percent of all permanent loan modifications originated in Q2 2014 had missed two or more payments one year after modification, according to FHFA.

Approximately 9,423 non-retention foreclosure prevention solutions (short sales and deeds-in-lieu of foreclosure) were completed during Q2, increasing the total to 623,963 since the conservatorships began in September 2008—about 18 percent of the total of home retention actions completed during that same time (3.5 million).

9-28 FHFA graph9-28 FHFA graph 2While the number of foreclosure prevention actions rose in Q2, the number of foreclosure starts declined by 11 percent down to 62,364; third-party and foreclosure sales declined by 14 percent down to 29,945 during the quarter, according to FHFA. The number of foreclosure prevention actions during Q2 was more than double the total of foreclosure sales during that same period.

REO inventory for Fannie Mae and Freddie Mae dropped by 14 percent during Q2, down to 86,515 for the two GSEs combined, as property dispositions continued to outpace property acquisitions. It was the first time the REO inventory for the GSEs has been below 100,000 since 2009.

The serious delinquency rate on loans backed by Fannie Mae and Freddie Mac declined to 1.6 percent by the end of the quarter, far lower than the rate for loans backed by other government agencies and less than half of the industry average of 4.0 for the quarter, according to FHFA. For loans backed by the Federal Housing Administration, the serious delinquency rate was 5.5 percent; for loans backed by the VA (Veterans Affairs), it was 2.9 percent. Improvements in the economy and increasing house prices resulted a decline of 6 percent during the second quarter of loans that were 60 or more days delinquent.

Click here to view the FHFA's entire foreclosure prevention report for Q2 2015.

9-28 REO chart

About Author: Brian Honea

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Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.

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