Fannie Mae and Freddie Mac could save $1.7 billion if they forgave principal on some distressed mortgages, new analysis show.
The Federal Housing Finance Agency-- which regulates the mortgage giants -- may decide in the next few weeks about whether to use principal forgiveness as a foreclosure prevention tactic, said Edward DeMarco, acting director of the FHFA while speaking Tuesday at the Brookings Institution.
The FHFA, and DeMarco, have come under pressure to allow Freddie and Fannie, which own or guarantee 60% of all home loans, to do principal forgiveness.
FHFA's previous analysis has shown that forgiving mortgage debt is no more effective than other loan modification efforts at reducing home loan defaults -- and could cost taxpayers more money since Freddie and Fannie were placed under government control in 2008.
But new incentives from the Treasury Department may change that, FHFA's preliminary assessment shows. With those, Freddie and Fannie could curb losses by $9.9 billion if almost 700,000 homeowners received a mortgage reduction, FHFA says. That's $1.7 billion more than if those homeowners received principal forbearance -- which means they defer payment on a portion of their loan.
DeMarco cautioned that any principal forgiveness would only help the U.S. housing crisis at the "margin," given that 11 million homeowners owe more on their homes than they're worth, based on CoreLogic estimates.
He also warned that some homeowners may stop paying their mortgages to try get a principal reduction. That could wipe out benefits to Freddie and Fannie. Also, Treasury incentives come from taxpayer funds so they'll still be "on the hook," says Anthony Sanders, real estate finance professor at George Mason University.
Principal reduction "is clearly getting more traction" as a foreclosure prevention tactic, says Laurie Goodman, senior managing director of Amherst Securities. The recent $25 billion mortgage settlement requires loan servicers to do at least $10 billion in principal reduction. That doesn't cover Freddie or Fannie loans.
Principal forgiveness supporters say it'll lead to fewer foreclosures and help stabilize housing prices. FHFA's new analysis -- and DeMarco's discussion of it -- signals that a change is likely, says Ira Rheingold of the National Association of Consumer Advocates.
DeMarco is "under enormous heat from the Obama administration" to do so, Rheingold says.
by Julie Schmit - Apr. 11, 2012 08:08 AM USA Today
Principal forgiveness gains appeal
Showing posts with label fhfa. Show all posts
Showing posts with label fhfa. Show all posts
Wednesday, April 11, 2012
Thursday, February 2, 2012
FHFA Takes First Step in Its REO Pilot Initiative | Mortgage News | Daily National and State Headlines
The REO Initiative was developed in conjunction with the U.S. Department of the Treasury, the U.S. Department of Housing & Urban Development (HUD), the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve, Fannie Mae and Freddie Mac. The Initiative was formulated by meetings with stakeholders and a review of more than 4,000 responses to a Request for Information (RFI) seeking input on options for selling single-family REO properties held by the government-sponsored enterprises (GSEs)—Fannie Mae, Freddie Mac—and the Federal Housing Administration (FHA).
“This is an important step toward increasing private investment in foreclosed properties to maximize value and stabilize communities,” said FHFA Acting Director Edward J. DeMarco. “I am grateful for the collaborative effort by the many stakeholders including investors, non-profit organizations, and state and local government officials, who have worked together on this Initiative.”
During the pilot phase, Fannie Mae will offer pools of various types of assets, including rental properties, vacant properties and non-performing loans, for sale with a focus on the hardest-hit areas. The first transaction will be announced in the near-term.
The pre-qualification will require those interested in receiving information regarding specific pilot transactions to meet certain minimum criteria including, but not limited to, (a) financial wherewithal to acquire the assets; (b) sufficient experience and knowledge in financial and business matters to analyze and bear the risks of the investment opportunity; and (c) agreement to keep certain information about the REO and related matters confidential.
Interested investors can register at FHFA’s REO Initiative page to pre-qualify. FHFA is also looking at ways to improve REO sales to homeowners and small investors, enhancing the existing retail sales strategy at the GSEs. Both companies sell the majority of their REO properties to owner-occupants at close-to-market value. The purpose of the pilot phase will be to examine investor interest in various types of assets, including the location, size and composition of pools of assets; the ways in which investors maximize the participation of experienced local firms and organizations that can provide the types of services and support needed to ensure community stabilization; the types of structures and/or financing that improve returns to the sellers as well as home values in impacted markets; and the process by which investors are qualified to and ultimately participate in the sales transactions.
by nationalmortgageprofessional.com Feb 1, 2012
FHFA Takes First Step in Its REO Pilot Initiative | Mortgage News | Daily National and State Headlines
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