Fannie, Freddie REO inventory swells

Fannie Mae and Freddie Mac boosted loan modifications by 76 percent in the last three months of 2008, but nearly doubled their inventories of real estate-owned properties over the course of the year as the companies eschewed short sales and seized properties faster than they could sell them.

Fannie and Freddie's regulator, the Federal Housing Finance Agency, submitted a report to lawmakers today detailing actions taken to prevent unnecessary foreclosures.

The report showed that among the 30.7 million residential mortgages owned or guaranteed by Fannie and Freddie, the percentage of loans delinquent by 60 days or more doubled from March to December, to 3.02 percent.

But the percentage of 60-day delinquent loans entering the foreclosure process peaked in February, at 9.22 percent, falling to 6.38 percent in December.

The percentage of 60-day delinquent loans completing the foreclosure process peaked at 2.89 percent in July, falling to 0.37 percent in December thanks in part to temporary moratoriums on foreclosure sales and evictions announced in November.

The moratoriums, intended to give loan servicers time to employ streamlined loan modification criteria developed by the Bush administration, were extended into 2009 as Fannie and Freddie developed new policies on rentals of REO properties.

Moratoriums on evictions remain in place through March 31, and on April 1, the Obama administration launches its "Making Home Affordable" loan modification and refinance program.

The program will rely on Fannie and Freddie to refinance 4 million to 5 million loans in which homeowners have less than 20 percent equity, and provides incentives and guarantees for servicers to modify 3 million to 4 million additional mortgages. The "Home Affordable" program guidelines were released March 4 (see story). ...CONTINUED

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