Archive for the 'Foreclosures Help' Category

Virginia-based government-sponsored enterprise Freddie Mac got $6.1 billion from the U.S. Treasury Department to prop up its finances as it operates its programs to help curb lender and government repo homes and stabilize the housing market.

The funds were requested by the Federal Housing Finance Agency, the overseer of Freddie Mac, after Freddie’s liabilities surpassed its assets by over $6 billion.

Since Freddie was put under the care of FHFA in September 2008, Freddie has already received a total of $51.7 billion in funding from the U.S. Treasury. Freddie can still access another $149.3 billion if it needs it to buy more home loans from lenders and help contain lender and government repo homes.

Since September 2008, the recent withdrawal is the third withdrawal Freddie has made.

In the first quarter this year, Freddie Mac reported a $9.9 billion loss or a $3.14 loss per share, with an $8.8 billion loss due to soaring default rates and declining home values and a $7.1 billion loss due to write-downs on mortgage-backed securities.

In 2008, Freddie Mac and Fannie Mae were among the most battered financial institutions due to the flood of foreclosures. Before these institutions could completely collapse and take the whole housing market down with them, the federal government took over and put Freddie Mac under FHFA supervision.

Freddie Mac and Fannie Mae made the housing and mortgage markets well-functioning by buying home loans from lenders and then selling them to securities investors. The two GSEs have purchased or have guaranteed nearly 31 million mortgage loans valued at $5.5 trillion, which is approximately 50 percent of all home mortgages in the country.

Freddie Mac supports the Obama administration’s program to curb lender or government repo properties by administering the loan refinancing scheme and the Home Affordable Modification scheme of the Obama program.

The two schemes were crafted to help distressed American homeowners whose home loans are guaranteed or owned by Freddie Mac.

Freddie Mac said that it has helped about 88,000 families keep their homes or remedy short sales in 2008. Currently, it holds about 7 percent of 2.5 million home loans in default and is helping lenders work out affordable repayment schemes to save houses from becoming lender and government repo homes.

Lastly, Freddie Mac has also been helping in rejuvenating the housing market by sustaining the liquidity of the mortgage markets, keeping mortgage rates affordable and stable and helping curb lender and government repo properties.

The number of homebuyers using Federal Housing Administration loans to buy private and government repo homes is increasing again after its decline in the 1990s.

In 2006, only two percent of homebuyers were using FHA loans. Most borrowers ignored FHA loans during the housing boom because of FHA loan limits and strict appraisal requirements. Home prices then were reaching their peak levels, surpassing FHA loan levels.

Now, FHA loans comprise almost 25 percent of loans taken out to buy private and government repo homes and other types of homes. Because lenders are now wary of making loans that would increase further losses, they are now more inclined to provide FHA-insured loans.

The FHA home loan insurance program encourages lenders to provide home loans to borrowers with lower down payments and lower credit scores because their losses will be covered by FHA.

Another factor for the rise in FHA loans to buy private and government repo homes is the increase in loan limits and choices of loan programs that borrowers can obtain.

Under the American Recovery and Reinvestment Act of 2009, FHA loan limits for purchases of single family homes have increased. The increased ARRA loan limits are based on limits set in the previously approved Housing and Economic Recovery Act of 2008 and the Economic Stimulus Act of 2008.

Under HERA, the FHA conforming loan limit for the year 2009 is $417,000, after which the Federal Housing Finance Agency will peg the loan limit to its chosen home price index.

Based on property size, the FHA loan limits are $271,050 for one-unit properties, $347,000 for two-unit properties, $419,400 for three-unit properties, and $521,350 for four-unit properties.

Also, the FHA loan limit for home equity conversion mortgages nationwide will increase from $417,000 to $625,500.

In high-cost cities, such as Washington, D.C. and New York City, FHA loan limits are set at $729,750.

Some critics said that giving higher FHA loans to borrowers who can only afford very minimal down payments and lower credit scores would cause another wave of private and government repo homes. But advocates of FHA loans argued that FHA has strict screening and appraisal guidelines. They explained that many prospective home buyers can afford to pay monthly home loan payments; they just cannot afford large amounts of down payments.

Now, FHA loans are not only being used to buy private and government repo homes; they are also being used to buy condominium units from housing developments previously approved by the FHA.

Government-sponsored enterprises, Federal Home Loan Mortgage Corp. and Federal National Mortgage Association increased by 57 percent the number of loan modifications they initiated in the first quarter of 2009.

The first quarter 2009 Foreclosure Prevention Report released by Federal Housing Finance Agency director James B. Lockhart showed that nearly 37,000 loans were modified to help contain the spread of repo houses for sale in the country.

The first quarter figures was 57 percent higher than the last quarter of 2008 and twice as big as the number of loan modifications made in the first three months the previous year.

According to the report, modifications accounted for 43 percent of efforts to contain the spread of repo houses for sale in the first three months of this year, an increase of 33 percent from the previous quarter.

Meanwhile, modifications with over 20 percent decline in monthly mortgage payments increased by 52 percent during the first quarter of 2009 from 2 percent the same period the previous year.

Completed actions to contain the spread of repo houses for sale, such as modifications, repayment plans or forbearance, showed a substantial increase during the first three months of this year, with nearly 87,000 deals finalized in the quarter. The figures represented nearly 20 percent increase from the previous quarter and twice as many compared with the first quarter 2008 total.

On the other hand, home retention activities which resulted to distressed borrowers remaining in their homes, accounted for nearly 90 percent of foreclosure prevention actions finalized during the first three months of 2009. The figures are consistent with the number of foreclosure prevention actions finalized the previous year.

Freddie Mac and Fannie Mae both owned or guaranteed 56 percent of the total outstanding loans. However, only 22 percent of loans that were seriously delinquent were owned or guaranteed by Freddie Mac and Fannie Mae.

Despite the increase in the number of delinquencies on loans owned or backed by Freddie Mac and Fannie Mae in the first quarter of this year, the delinquency rate was lower than the average rate reported by the whole industry.

By the end of the 2009 first quarter, the percentage of Fannie Mae and Freddie Mac’s loans that were behind 60 days and were in danger of becoming repo houses for sale was 3.6 percentage point, compared with Veterans Affairs loans of 6.1 percent, 10.2 percent for loans owned by the Federal Housing Administration and 9.2 industry average.

Evelyn Colon, a resident of Hartford, Connecticut, is seeking the help of the Greater Hartford Legal Aid (GHLA) from being evicted from her rental home which is being shutdown due to foreclosures. GHLA is a non-profit organization providing legal help to low-income families and individuals.
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