(Updats with details) By Michael R. Crittenden
Of DOW JONES NEWSWIRES
WASHINGTON -(Dow Jones)- U.S. officials formally rolled out a streamlined plan to use Fannie Mae (FNM) and Freddie Mac (FRE) to help struggling homeowners Thursday, and though the program's scope is limited supporters hope it will set an industry-wide standard to encourage foreclosure aid.
The Federal Housing Finance Agency, which regulates the two government-sponsored enterprises, said the program unveiled in early November was officially launched on Dec. 15.
An agency official and representatives from the two companies said initial reaction from industry participants has been positive and that six to 10 mortgage servicers have already suggested they hope to begin contacting mortgage borrowers before the end of the year with details of the program.
The plan, which federal officials hope will encourage a broader effort by industry firms to work with homeowners, targets owners who are at least 90 days past due on their mortgage. The aim is to lower monthly mortgage payments by reducing the ratio of mortgage debt to a borrower's income to 38%, whether by modifying interest rates or forbearing on some portions of a loan's principal.
Borrowers in the program would have a three month "trial period" to make their new mortgage payments. Servicers would receive an $800 payment if the borrower makes those payments, the loan is removed from a mortgage-backed securities pool, and the loan is successfully modified.
"We expect mailing volume will probably be aggressive," an FHFA official told reporters at a briefing on the plan.
Importantly, officials said, involving the GSEs is meant to create an industry-wide model for working with homeowners. Efforts to avert foreclosures have been unsuccessful in part because of the complicated contracts governing mortgage-backed securities and the reluctance of investors to agree to loan changes.
Officials said introduction of the new streamlined approach has already caused a number of private-label securities firms to inquire about the specifics of the proposal.
Officials declined to give an exact estimate for the number of borrowers who could potentially be helped by the program, which is being rolled out as the housing market continues to deteriorate and homeowners continue to face foreclosure at record levels.
An FHFA official estimated that the number of GSE-backed loans more than 90 days past due was around 400,000, roughly 20% of the total industry-wide figure. The new streamlined program, when combined with other foreclosure prevention efforts, will hopefully result in a 25% increase in the number of completed loan modifications in the future, the official said.
"These are all just estimates because there are unknowns," the official said, noting that an increase in seriously delinquent loans would likely result in a corresponding increase in the number of loan modifications.
FHFA this week reported that modifications completed on GSE loans fell for the second straight quarter during the three months ending in September. There were 13,450 modifications completed during the third quarter, down from 15,372 in the second quarter and 15,636 in the first quarter.
Those figures suggest an average of 4,900 loan modifications completed each month. A 25% increase in completed modifications would mean an extra 1,225 homeowners a month would receive foreclosure help, or nearly 15,000 annually.
That figure is likely to underwhelm policy makers who have pushed for much broader efforts to address foreclosures, which have caused a collapse of the housing market and led to the broader economic distress.
Federal Deposit Insurance Corp. Chairman Sheila Bair, speaking in Washington on Tuesday, said the U.S. government is "still very much behind the curve."
"We need a fast-track, nationwide effort," Bair said.
Foreclosure tracking firm RealtyTrac said last week that foreclosure filings were made on 259,085 U.S. properties during the month of November, up 28% from the same period in 2007. That equates to one in every 488 U.S. households receive a default notice, bank repossession or other notice.
-By Michael R. Crittenden, Dow Jones Newswires; 202-862-9273; michael.crittenden@dowjones.com
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Publié le 18 Décembre 2008 Copyright © 2008 Dowjones