Post-Moratorium Foreclosure Sales Surge
Although government-sponsored entities Fannie Mae (FNM) and Freddie Mac (FRE) increased their foreclosure prevention actions by 9% in February, completed foreclosure sales at the GSEs surged nearly 900% from January, according to the foreclosure prevention report issued Tuesday by the Federal Housing Finance Agency (FHFA) on behalf of the enterprises. FHFA director James Lockhart touted a 26% growth in completed loan modifications between the GSEs, while repayment plans grew 38% in February. Loan modifications accounted for 43% of all preventative actions in the month, he said, up from 43% in January. Of the month's modifications, 70% involved both interest rate reductions and term extensions. Credit quality deteriorated in the month, however, as collateral performance declined. Some 41,000 loans became 60+ days delinquent in February, bringing the total delinquent volume among the enterprises to 1.1m loans. One in 10 nonprime loans, which account for 16% of the enterprises' combined 30.2m loans, qualified as 60+ days delinquent at the end of February. The deterioration seen in the month hardly touches the massive influx of foreclosure sales completed on mortgages that became delinquent up to three months before. The enterprises temporarily froze foreclosure sales on owner-occupied properties from late November '08 to late January '09 and then revived the moratorium for the last two weeks of February. "The suspension led to a substantial reduction in completed foreclosure sales in December 2008 and January 2009," FHFA's Lockhart said. Once the moratorium expired at the end of January, however, completed foreclosure sales surged to 28,897 in February from 3,222 the month before. And that was just for the first half of the month. The second freeze expired March 6. If February's data is any indication, sales might also spike in next month's report. Write to Diana Golobay at email@example.com. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments.