Freddie Mac to increase short sale incentives
Freddie Mac will soon increase incentives paid for completed short sales, according to a spokesman for the government-sponsored enterprise.
Short sales increased dramatically since the crisis struck in 2007. Both Fannie Mae and Freddie Mac completed 112,935 of these transactions in the first three quarters of 2011, up from 107,953 in all of 2010 and nearly double the amount done in 2008 and 2009 combined, according Federal Housing Finance Agency data.
Many agree more can done but a number of stakeholders, including subordinate-lien holders and mortgage insurers, stand in the way. The government's Home Affordable Foreclosure Alternative especially has struggled since it launched in April 2010.
Through HAFA, the Treasury provides $1,500 for servicers and up to $2,000 for investors who allow up to $6,000 of the short sale proceeds be paid to subordinate-lien holders.
But servicers completed only 27,600 short sales and deeds-in-lieu of foreclosure through December. Of those, only 1,600 were for GSE-backed mortgages, according to Treasury Department data released Monday.
Private investors approved more than 18,300, and the rest were held on the servicer portfolio.
Nearly two-thirds of HAFA activity occurred in three states. Roughly 43% of these transactions occurred in California, followed by 15% in Florida and 6% in Arizona.
Some of the private investors, however, may hold the subordinate liens on the property along with the first.
"Since the program was announced, Treasury has amended the HAFA guidelines a number of times to expand the eligibility criteria," the Treasury said in the report. "To date, neither GSE has formally adopted this expanded eligibility criteria for their respective HAFA programs."
Fannie received clearance from the largest mortgage insurers to speed up short sales.
According to the Freddie spokesman, the upcoming incentive changes are being constructed with the hope of boosting short sale volumes. Whether these higher payments will go to servicers, investors or the subordinate-lien holders is unknown.