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.

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

 

During the last three months of 2008, loan modifications were approved for 23,777 loans owned or guaranteed by Fannie and Freddie, a 76 percent increase from the previous three months.

But over the course of the year, the mortgage giants repossessed about eight homes for every short sale they conducted.

Fannie and Freddie’s loan servicers agreed to 16,718 short sales in 2008, while the companies repossessed 145,183 homes, their annual reports showed.

By the end of the year, the companies were saddled with real estate-owned (REO) inventory of 92,884 homes — nearly twice the 48,123 properties on hand at the end of 2007.

Although Fannie Mae was able to sell 64,843 repossessed homes in 2008, it acquired 94,652 through foreclosure, leaving it with REO inventory of 63,538 homes at year end — an increase of 152 percent from the end of 2006.

Freddie Mac sold 35,579 homes in 2008, but repossessed 50,531. The company’s REO inventory ballooned from 14,394 homes at the beginning of the year to 29,346 homes by year end — a 334 percent increase from the end of 2006.

Neither Fannie nor Freddie responded to requests for comment on the ratio of foreclosures to short sales.

But FHFA’s report to Congress notes that short sales and deeds-in-lieu of foreclosure reached new highs in December.

The 2,261 short sales conducted in December represented a more than four-fold increase from the low of 516 reported in January, and a 20 percent increase from the prior three-month average of 1,883. Deeds-in-lieu were reported at 234 versus a low of 62 in May, and the prior three-month average of 159.

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