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Freddie Mac Enhances Mortgage Modification Software

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Freddie Mac (FRE) made adjustments to its Workout Prospector software package, used by its approved servicers to modify its distressed mortgages. Servicers can enter a Freddie Mac loan number and other data for help evaluating eligible borrowers for a loan modification under the Home Affordable Modification Program (HAMP). If a borrower is ineligible for the program, the software helps determine other foreclosure alternatives such as a short or a deed-in-lieu. In December, the US Treasury Department released a waiver stating that a borrower did not have to restart the three-month trial period on a modification if their stated income exceeded the verified income by more than 25%. Freddie responded by releasing steps to override the software to comply with the terms of the waiver. But recently, Freddie enhanced its software to give servicers an alternative to manually overriding each modification application. The new enhancements also include a bulk upload function for hardship reasons. Using the bulk upload feature, servicers no longer have to go into each of the loans in Workout Prospector after they are uploaded and manually select the corresponding imminent default hardship reason before running the workout waterfall. Under HAMP, servicers attempt to reduce the monthly mortgage payment ratio to less than 31% of the verified income. To do that, they run the loan through a waterfall of modification steps. According to the latest HAMP report, each of 170,000 permanent modifications received an interest rate reduction. More than 40% received a term extension, and 27% received principal forbearance. The delinquency rate in the Freddie single-family portfolio reached 4% in January, up from 3.87% from the month before and 1.98% in January 2009. Write to Jon Prior. The author holds no relevant investments.

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