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Fannie, Freddie’s Home-Retention Actions

Information released by the Federal Housing Finance Agency (FHFA) covering May show a sum of 65,243 foreclosure prevention actions during the 31-day period, which brings the number of such actions taken by government-sponsored enterprises Fannie Mae and Freddie Mac since the FHFA's 2008 formation to almost 6 million (5,965,347).

The FHFA Foreclosure Prevention and Refinance report issued Thursday goes on to analyze the GSEs' mortgage loan performance over the course of the month, including an examination of delinquency, COVID-related forbearance, and refinance data.

The GSEs carried out 4,689 permanent loan modifications in May, making a total of 2,462,360 home-retention focused mortgage modifications since '08. Some 13% of those May modifications involved principal forbearance, and 63% featured extended-term alone.

In May, 41,832 borrowers received payment deferrals after completing a COVID-19 related forbearance plan, which is a 25% decrease from April's 55,970. And the number of forbearance plan starts decreased by 2% between April and May. The total number of Fannie and Freddie loans in forbearance decreased from 592,985 at the end of April to 540,421 at the end of May. About 1.8% of FHFA loans, in other words, remain in forbearance. About 60% of their delinquent loans are in forbearance plans.

The 30-59 day delinquency rate increased to .78% of Fannie Mae and Freddie Mac-backed loans, while the serious delinquency rate decreased to 2.15% by the end of May.

As mortgage rates topped 3% in March and April, May's metrics showed decreased refinance volume. Three refinances in May were completed through the High LTV Refinance Option—a special refi program run by Fannie Mae for borrowers with very little equity who want to refinance during a period of low mortgage rates, which can help to make monthly mortgage payment more affordable. So far, the GSE has processed close to 200 of these types of refis. The Freddie Mac version is called the Enhanced Relief Refinance Mortgage Program, but, according to the report, that has yet to be utilized in any significant number.

About 28% of mortgagers refinanced into shorter term 15-year fixed rate mortgages in May as the difference between 15- and 30- year fixed rate mortgages steadily increased from the lows observed in late 2020 of 46 basis points to 70 basis points in April, FHFA reported.

Foreclosure filings went up in May by 9% to 2,206. Third-party foreclosure sales decreased 12% to 714. The federal foreclosure ban expired at the end of July.

A surge in home prices over the past decade has created a sort-of foreclosure-prevention buffer for struggling mortgagers in the form of equity, experts have explained to DS News.

Unlike the 2008 financial crisis, a time when many borrowers were underwater on their mortgages, borrowers who are delinquent on their mortgage payments today can tap into their equity and sell their home rather than lose it through foreclosure, CoreLogic's Frank Martell said when his company issued its equity report last month.

“Homeowner equity has more than doubled over the past decade and has become a crucial buffer for many weathering the challenges of the pandemic,” he said at the time. "This reduces the likelihood of large numbers of distressed sales from homeowners who emerge from forbearance later in the year."

The FHFA's monthly Foreclosure-Prevention and Refinance report is available in full at FHFA.gov.

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About Author: Christina Hughes Babb

Christina Hughes Babb is a reporter for DS News and MReport. A graduate of Southern Methodist University, she has been a reporter, editor, and publisher in the Dallas area for more than 15 years. During her 10 years at Advocate Media/Dallas Magazine, she published thousands of articles covering local politics, real estate, development, crime, the arts, entertainment, and human interest, among other topics. She has won two national Mayborn School of Journalism Ten Spurs awards for nonfiction, and has penned pieces for Texas Monthly, Salon.com, Dallas Observer, Edible, and the Dallas Morning news, among others. Contact Christina at christina.hughesbabb@thefivestar.com.
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