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Emac's Bottom Line

Housing Market Remains HAMPered

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Mortgage loan modifications by Fannie Mae and Freddie Mac plunged during the third quarter, with ongoing activity down by more than half, says the Federal Housing Finance Agency [FHFA], the overseer of Fannie and Freddie.

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Only 35,400 mortgages held by the two agencies were approved for permanent loan modifications under the government’s anti-foreclosure program, the Home Affordable Modification Program [HAMP], in the third quarter of 2010. That’s down from 88,600 in the second quarter.

HAMP was once supposed to help 3 million to 4 million people hang on to their homes.

Meanwhile, the total number of Fannie and Freddie mortgages in HAMP trial modifications fell to 88,200, down from 202,400 in the second quarter.

Bank home foreclosures still outnumber government foreclosure prevention methods, but the government is moving more quickly on foreclosure/mortgage modification programs, the FHFA says.

The data come as the White House and Congress have pressured Fannie and Freddie to write down more mortgages, and have pressured banks to stop foreclosures.

*Banks started 339,000 foreclosures on Fannie Mae and Freddie Mac mortgages in the 3Q, more than double the 146,507 modifications the government completed, says the FHFA.

*But Fannie and Freddie are starting more foreclosures, too, FHFA data show. Foreclosure starts jumped 23% in the 3Q vs 2Q, the most the FHFA has ever reported.

*FHFA sees improvement in seriously delinquent Fannie and Freddie mortgages, too. Loans in the 60-plus-day delinquency bucket dropped for the third-straight quarter, by 6.8% -- or 109,700 loans to roughly 1.5 million loans.

*Fannie and Freddie saw decent performance in the 3Q in another government anti-foreclosure program, the Home Affordable Refinance Program, which lets borrowers refinance and reduce monthly payments at loan-to-value ratios up to 125%. Fannie and Freddie servicers put 45,000 loans through HARP in September alone, up 55% from the previous month.

*That’s the highest total of any month since the program began in March 2009. Overall, HARP refinancings of Fannie and Freddie loans rose 26% in 3d quarter to 479,900.

Other bullet points:

- More than half of the loan modifications in the third quarter lowered borrowers’ monthly payments by over 30%.

- The total number of HAMP permanent modifications is now nearly 260,000.

- Loans modified in the last three quarters are “performing substantially better 3 months after modification, compared to loans modified in earlier periods.”

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