Loan Modifications Stay Steady as Short Sales Dry Up

The government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac continued active foreclosure prevention activities in the fourth quarter of 2013, completing just shy of 100,000 transactions, most of which permitted distressed borrowers to stay in their homes. The Federal Housing Finance Agency (FHFA), conservator and regulator of the GSEs, said today that the two companies have brought the total of homeowners they have assisted since 2008 to 3.1 million, 1.6 million of whom received permanent loan modifications and another 0.9 million who received other home retention assistance.

In 2013 the GSEs completed nearly 448,000 foreclosure prevention actions, 99,700 of which were in the fourth quarter. The fourth quarter activity included 79,543 home retention actions (61,916 loan modifications, both proprietary and through the Home Affordable Modification Program (HAMP); 15,149 repayment plans, 2,312 forbearance plans, and 166 charge-offs in lieu. Total home retention actions in the previous (third) quarter of 2013 numbered 74,879. Short Sales accounted for their lowest share of total prevention actions since 2009.

Home forfeitures numbered 20,161 during the fourth quarter compared to 25,997 in the third. Short sales predominated with 15,440 completed (down from 21,803 in Q3). The remaining transactions were deeds-in-lieu of foreclosure. Over one-half million homeowners have been assisted in exiting homeownership without a formal foreclosure since 2008.

Approximately 31 percent of permanent loan modifications completed in the fourth quarter contained some measure of mortgage balance forbearance. The GSEs are not permitted by FHFA to permanently reduce the principal balance of mortgages. Nearly half of permanent modifications reduced homeowners' monthly payments by more than 30 percent.

Serious delinquencies continue to fall and were down by 7 percent during the quarter to a new post-crisis low of 2.4 percent. Completed third-party and foreclosure sales also continued their downward trend in the fourth quarter with a 15 percent drop. Foreclosure starts were down 3 percent.

The performance of modified loans remains strong. As of December 31, 2013, about 13 percent of loans modified in the fourth quarter of 2012 had missed two or more payments, one year after modification.