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More loans going bad, but more get help

Report: Rising delinquencies not translating into foreclosure starts

More homeowners fell behind on their payments during the third quarter of 2009, but fewer were funneled into the foreclosure process as loan servicers engaged in more loan workouts, modifications and short sales, according to a new report.

Foreclosure starts on loans guaranteed by Fannie Mae and Freddie Mac fell 15 percent from the second quarter to the third quarter, the Federal Housing Finance Agency said in its quarterly Foreclosure Prevention and Refinance Report.

The 254,200 foreclosure starts seen during the quarter helped push the number of loans guaranteed by Fannie and Freddie that were in the process of foreclosure or three or more payments behind at the end of September to 1.27 million — a 20 percent increase from June and up 174 percent from a year ago.

The number of loans delinquent by 60 days or more also grew by 260,300, to nearly 1.6 million.

Completed foreclosure and third-party sales climbed 23 percent from the second quarter to the third, to 71,000. But foreclosure sales as a percentage of foreclosure starts fell from 39 percent to 29 percent over that time, due to Home Affordable Modification Program (HAMP) trial loan modifications and other foreclosure prevention strategies, the report said.

During the first nine months of the year, Fannie and Freddie’s loan servicers allowed 170,500 foreclosure and third-party sales, a number equal to about 14 percent of the average number of loans that were delinquent by 60 days or more during the period. …CONTINUED