Home Affordable Trials Slow April Modifications

Fannie Mae (FNM) and Freddie Mac’s (FRE) completed mortgage modifications fell 12% in April 2009 on the conclusion of the Federal Housing Finance Agency’s (FHFA) Streamlined Modification Program and the launch of the Home Affordable Modification Program (HAMP). According to the FHFA’s April Foreclosure Prevention Report, loan modifications peaked to a 12-month high in March, with the two GSEs completing 15,703 modifications. That number fell to 13,787 in April. Modifications done through the HAMP are considered complete after a three-month trial period that evaluates the borrower’s ability and willingness to make timely payments. Therefore, whatever HAMP modifications were initiated in April will be counted in July’s report. Despite the decline, loan modifications accounted for 48% of all GSE foreclosure prevention efforts, up from 47% in March. Of those modifications, 75% included both interest rate reductions and term extensions, up from 73% in March. Modifications, along with other methods like short sales, deeds in lieu of foreclosure, forbearance and other repayment plans, combined for a total 28,812 foreclosure prevention actions and brought the four-month tally of actions taken by the GSEs to 115,403. Delinquencies, however, were also on the rise. Approximately 71,700 loans became 60 or more days delinquent in April. That 7% increase in 60-plus-days delinquencies brought the total number of past due loans to 1.2m. One bright note for homeowners is the 3% decline in foreclosure starts during April, as servicers prepared to determine distressed homeowners’ eligibility for loan modification through the HAMP. There were 85,938 foreclosure starts in April, down from March’s 12-month peak of 88,491, but April’s figure was still higher than every other month in the past year. With the implementation of the HAMP, modifications should rebound from their April decline. Foreclosures are also expected to continue their decline, as servicers are required by HAMP guidelines to consider foreclosure alternatives like short sales and deeds in lieu when a borrower is ineligible for the program. Write to Austin Kilgore.

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