Lending Industry Still Fighting Mortgage Modification as Foreclosure Crisis Continues

/PRNewswire/ -- As the House debates the Wall Street Reform and Consumer Protection Act of 2009 this week, the lending industry continues to fight a mortgage modification provision that would allow bankruptcy judges to adjust the terms of mortgages to help struggling families as part of a broader effort to stem the worsening foreclosure crisis.

Lending industry opponents of the measure, some of the biggest recipients of federal bailout money, have spent lavishly on lobbying and campaign contributions in 2009. An analysis by Common Cause and Public Campaign shows that the coalition of banks opposed to the mortgage modification provision - including Citigroup, Bank of America, Wells Fargo and JPMorgan Chase & Co -- have spent more than $80 million on lobbying and more than $6 million on campaign contributions this year, according to data from the Center for Responsive Politics.

"These Wall Street banks were rescued by the taxpayers after they almost collapsed under their own bad investments," said Common Cause President Bob Edgar. "They took that money and are spending millions lobbying and making campaign contributions to stop proposals that would help those same taxpayers keep their homes."

"From regulatory reform to health care, campaign cash from Wall Street interests is permeating every corner of debate in Washington, D.C.," said Nick Nyhart, president and CEO of Public Campaign. "Congress must create a political system that works for all of us, not just those with money to spare. It's time to pass the Fair Elections Now Act."

The House is currently debating the Wall Street Reform and Consumer Protection Act of 2009 (HR 4173), the most significant overhaul of the financial industry since the New Deal. It may take up the bankruptcy amendment offered by Judiciary Committee Chairman John Conyers Jr. (D-MI) and Rep. Zoe Lofgren (D-CA) as soon as today. The House passed identical language in March, but the effort ran aground in the Senate.

Some House members want the Senate to reconsider the proposal, as most major lenders have not responded to the voluntary initiatives adopted in place of the bankruptcy provision. The Treasury Department estimates that only one-in-five eligible households have received government assistance through these voluntary programs.

Common Cause and Public Campaign continue to work to pass the Fair Elections Now Act (H.R. 1826 / S.752) as the comprehensive solution to the pay-to-play culture in Washington, D.C. exposed by the debate over regulatory reform. The legislation, sponsored by Sen. Dick Durbin (D-Ill.) and Rep. John Larson (D-Conn.) would create a citizen-funded election system for Congress in which candidates could run for office on a blend of small donations and public funds.

-----
www.fayettefrontpage.com
Fayette Front Page
www.georgiafrontpage.com
Georgia Front Page

Avoidable Foreclosures Continue Despite Servicers' 'Loan Modifications'

/PRNewswire/ -- Why have several recent programs designed to encourage loan modifications failed to slow America's still-worsening home mortgage foreclosure crisis? A new report from the National Consumer Law Center (NCLC) discloses that mortgage servicers - including many large banks - have found it cheaper to foreclose on homeowners than to offer loan modifications that would benefit homeowners and investors.

The result: Americans who might be able to stay in their homes under a loan modification plan are being moved right past that option and on to foreclosure.

The new NCLC report, "Why Servicers Foreclose, When They Should Modify, and Other Puzzles of Servicer Behavior," reveals that servicers, unlike investors or homeowners, generally don't risk losing money on foreclosures. In fact, servicers usually make money on foreclosures.

Report author Diane E. Thompson, an attorney with NCLC, said, "The country is in the midst of a foreclosure crisis of unprecedented proportions. Millions of families have lost their homes and millions more are expected to lose their homes in the next few years. With home values plummeting and layoffs common, homeowners are crumbling under the weight of mortgages that were at best only marginally affordable when made. One common sense solution to the foreclosure crisis is to modify the loan terms in more instances. Foreclosures are a costly ordeal for the homeowner, the lender, and the community. Yet they continue to outstrip loan modifications because servicers have no incentive to help borrowers stay in their homes."

Who are these servicers that profit from foreclosures? Servicers are the banks or financial companies that usually collect payments and administer mortgage loans. They play a key role in the current foreclosure crisis, since original lenders frequently sell loans to investment trusts that rely on servicers to carry out most day to day transactions. Homeowners seeking to save their homes by modifying unaffordable loans typically deal with servicers. That is why the financial interests of servicers have the potential to hurt homeowners.

And too many of those financial incentives encourage servicers to ignore the interests of homeowners. For example, the report found that servicers often deny homeowners principal and interest rate reductions because as servicers they find it profitable to offer repayment plans or forbearance agreements that do little to reduce homeowners' debt burdens.

The consequences of such choices can be grim for homeowners. As the NCLC report notes: "Loan modifications inevitably cost the servicer something. A servicer deciding between a foreclosure and a loan modification faces the prospect of near certain loss if the loan is modified, and no penalty, but potential profit, if the home is foreclosed."

The NCLC report also found that the lack of third-party oversight allows servicers to pursue foreclosure instead of effective loan modifications that would benefit homeowners as well as investors. While credit rating agencies and bond insurers do monitor servicers, their oversight too often encourages servicers to foreclose.

The NCLC report includes a detailed examination of loans in foreclosure from 1995-2009 and how components of servicer compensation affected the likelihood and speed of foreclosure. It also looks at the rise of the servicer industry as a by-product of securitization; and the limited, but only effective oversight of servicers by credit rating agencies and bond insurers.

RECOMMENDED REFORMS

Thompson said: "The people who could change the way servicers are doing business - Congress, the Administration, and the Securities and Exchange Commission - and the market participants who set the terms of engagement - credit rating agencies and bond insurers - have failed to provide servicers with the necessary incentives to reduce foreclosures and increase loan modifications."

The NCLC report outlines the following action steps:

-- Avoid irresponsible lending through regulation of loan origination
-- Mandate loan modifications before a foreclosure
-- Fund quality mediation programs
-- Provide for principal reductions on existing loans in the
Administration's Home Affordable Modification Program (HAMP) and
through bankruptcy reform
-- Increase automated and standardized loan modifications for borrowers
in default and provide a safety net for borrowers for whom a
standardized modification is not affordable or who later default,
through no fault of their own, on a loan modification
-- Ease accounting rules for modifications to facilitate standardized
review, encourage long-term modifications, and enhance servicer
recovery of the expenses incurred in performing a modification
-- Require more transparency and uniformity in how servicers report loan
modifications to investors
-- Limit fees charged borrowers in default to reasonable and necessary
ones

-----
www.fayettefrontpage.com
Fayette Front Page
www.georgiafrontpage.com
Georgia Front Page

Fannie Mae Undertakes 'Making Home Affordable' Refinancing and Modification Initiatives

/PRNewswire-FirstCall/ -- Fannie Mae (NYSE:FNM) today began making two new initiatives -- Home Affordable Refinance and Home Affordable Modification -- available to its servicers and borrowers as part of the Obama Administration's Making Home Affordable program. The two initiatives are designed to significantly expand the numbers of borrowers who can refinance or modify their mortgages to a payment that is affordable now and into the future.

"Making Home Affordable provides crucial tools to mortgage lenders and homeowners coping with financial hardship and declining home prices," said Herb Allison, president and chief executive officer. "Potentially millions of homeowners could qualify for and benefit from these initiatives. The people of Fannie Mae will do all they can to make the program a success for homeowners across America and to advance the nation's housing recovery."

Home Affordable Refinance

Home Affordable Refinance includes new refinancing flexibilities for homeowners whose loans are owned by Fannie Mae. Key features include:

-- Additional Flexibilities: Most borrowers refinancing an existing
Fannie Mae loan will not be required to buy new or additional mortgage
insurance if the loan at the time of the refinance is more than 80
percent of a home's value. Any existing mortgage insurance may be
carried forward to the new loan. In addition, Fannie Mae can refinance
loans up to 105 percent of a home's value with this new flexibility,
so even borrowers who are "underwater" -- who owe more than their home
is worth -- may be able to refinance. This will expand the number of
borrowers able to take advantage of lower interest rates that reduce
monthly payments, or refinance into a more sustainable mortgage.
-- Streamlined Processing: Beginning in April, all 1,600 lenders and
29,000 mortgage brokers using Fannie Mae's Desktop Underwriter(R)
platform will be able to process an application to refinance any
existing Fannie Mae loan, allowing for greater lender origination
capacity and easier refinancing for borrowers.

What Borrowers Need to Know:

-- To qualify, your mortgage loan must be owned by Fannie Mae.
-- You must have a solid payment history on your existing mortgage.
-- The expanded refinance flexibility ends in June 2010.

Home Affordable Modification


Through the Home Affordable Modification, Fannie Mae will work with loan servicers across the country to help distressed borrowers modify their current loan into a mortgage that is more affordable and sustainable. Loan servicers participating in the program may reduce interest rates, lengthen the payment time frame or take other steps, such as principal forbearance, to bring the monthly payments down to as low as 31 percent of the borrower's gross (pre-tax) income.

What Borrowers Need to Know:

-- To modify a loan through Home Affordable Modification, it must be for
your primary residence.
-- You need not wait to become delinquent with your payments -- a plan
can be put in place as soon as you think you may have trouble making
your mortgage payment.
-- The amount you owe on your mortgage must be less than or equal to
$729,750.
-- The program is for mortgages originated prior to January 1, 2009.
-- Certain eligibility requirements, including attesting to a financial
hardship, may apply in some cases.



To ensure borrowers currently at risk of a foreclosure have the opportunity to apply for a Home Affordable Modification, Fannie Mae servicers have been directed not to proceed with a foreclosure until a borrower has been evaluated for the program.

Finding Out if a Loan is Owned by Fannie Mae

Borrowers can find out if their loan is owned by Fannie Mae in one of two ways:

-- Call your current mortgage lender or servicer. The phone number
should be on your monthly mortgage statement or monthly coupon book.
-- Contact Fannie Mae. Call 1-800-7FANNIE (8 a.m. - 8 p.m. ET) or visit
http://www.fanniemae.com/homeaffordable.

Fannie Mae also intends to make an online tool available later this month so borrowers can look up their loan and determine if it is owned by the company.

-----
www.fayettefrontpage.com
Fayette Front Page
www.georgiafrontpage.com
Gerogia Front Page

Freddie Mac Announces Two Initiatives Supporting President Obama's Making Home Affordable Plan

/PRNewswire-FirstCall/ -- Freddie Mac (NYSE:FRE) today announced two new mortgage initiatives under President Obama's Making Home Affordable plan designed to help families with Freddie Mac-owned mortgages who are delinquent, at-risk of default, or struggling to refinance because of declining property values.

The new initiatives include Freddie Mac's Relief Refinance(SM) Mortgage and the implementation of the Obama Administration's new Home Affordable Modification program.

"We are proud to support President Obama's bold initiative to restore stability and affordability to the housing market," said Freddie Mac Chairman of the Board, John Koskinen. "Today's announcement will give Freddie Mac seller/servicers the tools to refinance borrowers into loans with more affordable terms and provide at-risk borrowers with a potent new loan modification alternative."

Refinance Relief for More Borrowers

The new Freddie Mac Relief Refinance Mortgage is designed to assist borrowers who are current on their mortgage payments but who would benefit from refinancing into mortgages with terms that better position them for long-term homeownership. To qualify, borrowers must have mortgages that are owned or guaranteed by Freddie Mac.

Eligible borrowers can use Relief Refinance Mortgages to improve their position for long term homeownership success by reducing their current mortgage interest rate or shortening the amortization term. Similarly, the Relief Refinance Mortgage can be used to replace an adjustable rate mortgage, an Initial Interest(R) Mortgage or balloon/reset mortgage with a 15-, 20- or 30-year fixed-rate mortgage.

The loan-to-value ratio on Relief Refinance Mortgages can be as high as 105 percent of the property's value. There is no maximum TLTV/HTLTV ratio, however Relief Refinance Mortgages cannot be used to payoff or reduce subordinate liens. What's more, existing liens must continue to be subordinate to the Relief Refinance Mortgages.

To reduce borrower costs and simplify the refinance process Freddie Mac is encouraging lenders to use Home Value Explorer (HVE) when applicable, Freddie Mac's sophisticated automated valuation model. In addition, lenders using HVE will not be required to provide the standard representations and warranties on the property's value, condition and marketability.

Lenders will not have to re-underwrite a borrower if the Relief Refinance Mortgage raises their monthly principal and interest payment by 20 percent or less. But, in cases where the change in monthly principal and interest payment is more than 20 percent, borrowers will be underwritten through a simplified process. to increase their success with the new mortgage.

Mortgage insurance (MI) is not required if the existing mortgage does not require MI. Otherwise, MI coverage on the new loan must be the same as on the original mortgage.

Freddie Mac Relief Refinance Mortgages are only available for a limited time. Seller/Servicers must deliver Relief Refinance Mortgages under contracts taken out on or after April 1, 2009 through the company's on-line selling system. In addition, Relief Refinance Mortgages must be originated by June 10, 2010.

National Modification Effort Launched

Freddie Mac also announced support for the new national Home Affordable Modification program which begins on April 1, 2009 and is designed to help more at-risk borrowers achieve successful homeownership by lowering their monthly payments. To qualify, borrowers must have a Freddie Mac-owned or guaranteed mortgage originated on or before January 1, 2009.

To demonstrate its commitment to the Administration's new initiative, Freddie Mac has directed its servicers to ensure that every possible effort is made to achieve a successful workout for delinquent borrowers through the new Home Affordable Modification program or Freddie Mac's other workout options before initiating a foreclosure.

The new Home Affordable Modification program is expected to further reduce payments to more affordable levels, and in some cases assist eligible homeowners before they fall behind on their mortgage payments.

Last year, Freddie Mac approved more than 87,000 workouts on its seriously delinquent loans and launched the Streamlined Modification Program in November 2008 with Fannie Mae, the Federal Housing Finance Agency, and the HOPE Now Alliance.

Next Steps For Borrowers

Borrowers interested in learning more about the Freddie Mac Relief Refinance Mortgage or the Home Affordable Modification program should contact their mortgage servicer. Borrowers should also contact their servicer to find out if Freddie Mac owns or guarantees their mortgage.

Freddie Mac also said that depending on the level of borrower response to the Relief Refinance Mortgage program and the new modification initiative and the number of borrowers who qualify for such refinancings and modifications, the impact of resulting prepayments on certain Freddie Mac Mortgage Participation Certificates, or PCs, could be material.

-----
www.fayettefrontpage.com
Fayette Front Page
www.georgiafrontpage.com
Georgia Front Page

Data: Mortgage 'Foreclosure Prevention' Fixes Failing to Work, U.S. Home Foreclosure Toll Now Expected to Rise Even Higher to Eight Million

/PRNewswire-USNewswire/ -- Much hyped "foreclosure prevention programs" relying on voluntary loan modifications are failing to reach a significant number of troubled homeowners and are often backfiring when they do so, according to newly updated research released today by the National Association of Consumer Bankruptcy Attorneys (NACBA). The across-the-board failure of these much ballyhooed "fixes" for the foreclosure crisis are expected to result in the new President and Congress facing considerable new pressure to clear the way for court-supervised loan modifications that will prove more beneficial for homeowners.

The findings released today by NACBA come on the heels of a dire new projection from Credit Suisse that "over 8 million foreclosures (are now) expected" over the next four years in the U.S. That astounding level accounts for 16 percent of all mortgages -- including 59 percent of all subprime mortgages and more than 11 percent of all other mortgages, including Alt-A, options ARMS and even those in the prime category. This new forecast from Credit Suisse is up sharply from the two to six million foreclosure range cited in previous estimates from industry sources.

The new data presented today from Professor Alan White, Valparaiso University School of Law, Valparaiso, IN, is updated through November 2008 (http://www.hastingsgroup.com/Whiteupdate.pdf) and shows that:

-- Less than 10 percent of the time do the voluntary programs result in a
reduced principal loan balance with more than half of modifications
capitalizing unpaid interest and fees into larger and more drawn out
debt on the back end of the mortgage; and

-- Only about a third (35 percent) of voluntary mortgage modifications
reduce monthly payment burdens for homeowners, with nearly half (45
percent) actually saddling distressed homeowners with increased
payments under the modifications.


Just how badly are the voluntary modification programs flopping? To answer that question NACBA reviewed the publicly available data about the reach to date of the much-hyped programs. In one prominent case - the Hope for Homeowners Act FHA refinancing program passed by Congress with much fanfare earlier this year on the strength of forecasts that 400,000 homeowners would be aided - there have been only 312 applications to date -- and no mortgage modifications whatsoever have taken place. This is consistent with the most recent estimates from the National Association of Attorneys General that "nearly 8 out of 10 seriously delinquent homeowners are not on track for any loss mitigation outcome ... up from 7 in 10 in previous reports."

Henry Sommer, president, National Association of Consumer Bankruptcy Attorneys, Philadelphia PA., said: "Court-supervised loan modification is urgently needed to deal with this problem. We call on the incoming Obama administration and the new Congress to adopt this solution without delay. The American home mortgage foreclosure crisis has gone from the danger zone to the full-blown crisis stage. The number of foreclosures is growing rapidly and is reaching well beyond the subprime world to the American middle class. Despite a proliferation of voluntary programs, we are not seeing evidence of a meaningful number of sustainable loan modifications."

Professor Alan White, Valparaiso University School of Law, Valparaiso, IN, said: "American homeowners are carrying 10.5 trillion dollars in mortgage debt, a number that has risen by 250 percent in the past decade. While banks have written down more than half a trillion in mortgages and mortgage-related securities, homeowners have gotten little or no relief. A broad range of economists from Nouriel Roubini to Ben Bernanke to Martin Feldstein have recognized the need to deleverage the American homeowner. The excess mortgage debt is depressing home prices and consumer spending, and acting as a drag on the broader economy. Empirical evidence from mortgage servicer reports to investors shows that for the most part, the necessary deleveraging of homeowners is not happening."

Alys Cohen, staff attorney, National Consumer Law Center (NCLC), Washington, DC, said: "Sadly, the magnitude of the foreclosure crisis dwarfs the response to date from the financial services industry, regulators and lawmakers. The lack of aggressive and meaningful solutions from federal policymakers is baffling, particularly given that most economists, including the Chairman of the Federal Reserve Board and the Chair of the FDIC, have recognized that the financial crisis can be resolved by only by dealing with its root cause - the escalating millions of mortgage foreclosures ... The foreclosure crisis will not be resolved through voluntary efforts on the part of the financial services industry alone. Despite widespread efforts to encourage voluntary loan modifications, it is clear that the financial services industry has failed to implement a loan modification strategy on a scale that matches the urgent crisis we are facing. Bankruptcy courts must be empowered to implement economically rational loan modifications where the parties are unwilling or unable to do so on their own. Loan modifications through the bankruptcy courts can help accomplish this on a sufficient scale and timeframe to have a meaningful impact. Congress should lift the ban on judicial modification of primary residence mortgages, as part of the solution to stemming the tide of avoidable foreclosures and stabilizing the housing market and the broader economy. The need is urgent. The time for action is now."

When NACBA, NCLC, Consumer Federation of America (CFA) and the Center for Responsible Lending (CRL) called on Congress in April 2007 to move aggressively to stem the growing flood of home foreclosures, it was estimated that some 2 million homeowners were at risk of foreclosure. And, at the time, the financial services industry accused the organizations of being overly pessimistic about the likely toll of foreclosures. However, it turns out we were low-balling quite significantly the number of foreclosures.

As of September 2008, a full 1.2 million homeowners with subprime loans already had lost their homes to foreclosure. Another 1.7 million families with subprime loans are seriously delinquent and at risk of losing their homes in the very near future. Credit Suisse ("Foreclosure Update: Over 8 million foreclosures expected," December 2008) now estimates that 8.1 million mortgages will be in foreclosure over the next four years, representing 16 percent of all mortgages. Disturbingly, Credit Suisse finds that the problem has spread from subprime loans to Alt-A, option ARMs, and even prime loans.

FAILURE OF "FORECLOSURE PREVENTION PROGRAMS"

Bowing to the demands of the financial services industry that created the foreclosure crisis in the first place, every program put in place to prevent foreclosures has relied on the voluntary cooperation of mortgage servicers who handle the mortgages that, in most cases, are owned by securitized trusts that have issued bonds to investors. It is painfully obvious that these voluntary programs have failed to stem the tide of foreclosures. The few successful attempts at mortgage modification, such as the FDIC efforts with IndyMac, have largely dealt with those rare mortgages that are still owned by a single lender, rather than securitized loans.

Voluntary programs are failing for a variety of reasons that cannot be changed without action by the Obama Administration and new Congress:

-- Multiple owners make voluntary modification impossible. Many borrowers
and even their servicers simply cannot locate the holders of the
mortgage to negotiate with, or there are multiple owners all of whom
would have to agree to modification; the loans have been sliced and
diced so many times that all of the owners cannot be found and brought
into the process.

-- Fear of investor lawsuits blocks voluntary modifications. The servicer
has obligations to the investors who have purchased the
mortgage-backed securities through pooling and servicing contracts,
and the interests of these investors conflict. Servicers are hesitant
to modify the loans because they are concerned that it will impact
different tranches of the security differently, and thereby raise the
risk of investor lawsuits when one or more tranche loses potential
income. At least one servicer has already been sued. Under the
current system, the legally safest course for the servicer clearly is
foreclosure.

-- Piggyback seconds block voluntary modifications. Perhaps the most
intractable problem is the fact that a third to a half of all 2006
subprime borrowers took out piggyback second mortgages on their homes
at the same time they took out their first mortgages. In these cases,
the holders of the first mortgages have no incentive to provide
modifications that would free up borrower resources to make payments
on the second mortgages. At the same time, the holders of the second
mortgages have no incentive to support effective modifications by
waiving their rights, which would likely cause them to face a 100
percent loss. The holders of the second mortgages are better off
waiting to see if a borrower can make a few payments before
foreclosure.

-- Overwhelmed servicers are not set up to negotiate modifications.
Hundreds of thousands of borrowers are asking for relief from
organizations that traditionally have had a "collections" mentality of
trying to foreclose as quickly as possible. They know how to
foreclose, and the foreclosure process has been increasingly automated
to maximize the fees the servicers receive. Many receive no extra
compensation for working on modifications. These servicers are not
disposed to postponing foreclosure or equipped to handle case-by-case
negotiations. Many also have monetary incentives to foreclose rather
than modify.


In practice, these roadblocks - all of which were warned of months ago by NACBA and other groups - have resulted in gridlock in the voluntary modification programs. Consider these examples:

-- Hope for Homeowners Act -- This law, passed with much fanfare last
spring, provides an FHA refinancing if the servicer agrees to accept
slightly less than the value of the home in satisfaction of the debt.
The thought was that servicers would agree to accept less than 100%
payment if that payment was guaranteed by the government. It was
expected that the program would help 400,000 homeowners but since it
opened in October, fewer than 312 people have applied for the program
and no loans have been modified. The result? As Credit Suisse notes
in its December 2008 report: "While loan modifications and similar
interventions (such as the Hope for Homeowners FHA refinancing
program) could help to reduce the march of foreclosures, the
proliferation of generally timid loan mod programs with confusing loan
features raises significant doubt as to whether the current loan mod
momentum is sufficient to reduce foreclosures materially ... modified
loans remain a small percentage of delinquent loans and loans in
foreclosure, even though servicers have ramped up their efforts in
recent months."

-- Hope Now -- This voluntary effort by the industry, promoted by the
Administration, has produced more public relations than real results.
Homeowners have great difficulties getting answers because the
services do not have adequate staff to deal with requests. When some
accommodation is reached, servicers virtually never reduce loan
principal and often enter into repayment agreements that do not even
reduce loan payments. Studies have shown that most of the workouts
negotiated through Hope Now provide at best temporary short-term
relief from foreclosure, and in a large percentage of cases, the
homeowner cannot keep up with payments because the agreement does not
adequately modify the loan. As of September 2008, Hope Now worked out
loan modifications resulting in lower monthly payments for 266,087
homeowners; loan modifications with the same or HIGHER monthly
payments for 226,667 families; and 780,000 short term repayment plans.

-- FDIC/IndyMac - This effort covers 65,000 borrowers who are more than
two months delinquent on their mortgage, but doesn't reduce the
outstanding debt in any meaningful way and therefore has not attracted
much interest. So far, 7,200 homeowners have modified their loans
under this program. And, after a two-month moratorium on foreclosures
pending the modification program, IndyMac foreclosures in November
skyrocketed 242 percent from October, according to Mark Hanson of the
Field Check Group.


Most recently, FDIC Chairwoman Bair has proposed a program that would, like Hope for Homeowners, provide government guarantees as a carrot to entice servicers to make modifications of interest rates and defer principal payments under a formula based on the debtor's ability to pay. If the payments are modified by at least 10 percent, (but only for five years) the government would guarantee 50 percent of the loan losses. The Treasury Department noted that this program could actually give servicers an incentive to make minimal modifications and then foreclose to collect the guarantees.

While NACBA applauds FDIC Chair Bair's commitment to homeowners, it fears that, other than in cases where a planned foreclosure would be more lucrative for the servicer, this program also would have few takers. It is likely that, for all the same reasons plaguing existing programs, servicers would be unwilling to make meaningful modifications of most loans voluntarily. Moreover, the program does nothing to deal with the problem of piggyback second mortgages, often the riskiest loans given by the most irresponsible lenders. Holders of second mortgages can block the modification of the first mortgage, even though the second mortgage typically would be wiped out in a foreclosure sale. Absent reductions in principal, the program will neither sufficiently reduce payments nor prevent later foreclosures when homeowners need to move or cannot refinance to resolve a financial problem. As even Federal Reserve Board Chairman Bernanke has noted, "With low or negative equity ... a stressed borrower has less ability (because there is no home equity to tap) and less financial incentive to try to remain in the home." At best, the Bair proposal would help only a small number of homeowners and, in most cases, only postpone the foreclosure problem - at considerable expense to taxpayers.

-----
www.fayettefrontpage.com
Fayette Front Page
www.georgiafrontpage.com
Georgia Front Page

Fannie Mae Provides New Servicer Flexibility to Help Borrowers Avoid Foreclosure

/PRNewswire-FirstCall/ -- Fannie Mae (NYSE:FNM) announced a series of actions designed to help borrowers and loan servicers address potential mortgage problems and prevent unnecessary home foreclosures among the more than 18 million single-family loans owned or guaranteed by Fannie Mae.

Fannie Mae said the actions are designed to build on and complement the recently announced streamlined loan modification program (SMP) that targets borrowers who have missed three full payments and meet certain other criteria. The steps announced today are meant to reach borrowers earlier with foreclosure prevention options, and include:

-- Specific direction to servicers to provide foreclosure prevention
assistance as soon as a borrower demonstrates the need for help --
even if a borrower is current but default is reasonably foreseeable.
-- Fannie Mae's new Early Workout program allowing servicers, in one
step, to pre-negotiate a loan modification that becomes effective and
permanent only after an initial trial period. The Early Workout
process can begin as soon as a borrower demonstrates the need for a
modification -- even if a borrower is current but a default is
reasonably foreseeable.
-- Doubling of the maximum forbearance and repayment plan periods for
most loans to borrowers in need of loan workouts.
-- A new 2009 Single-Family Master Trust Agreement and servicer guidance
that give Fannie Mae servicers the flexibility to remove a loan from
an MBS pool once the loan is one month delinquent for the purpose of a
loan modification. This applies only to loans backing securities
issued on or after January 1, 2009. Trust agreements for pools issued
before that date do not allow for this flexibility, but as described
above, Early Workout gives servicers the tools necessary to address
problem loans as early as necessary, regardless of MBS pool date.



These policy changes will enable Fannie Mae servicers to provide a uniform, consistent set of foreclosure prevention options for borrowers who demonstrate the need for help, whether a loan is owned by Fannie Mae or is included in a securitized Fannie Mae MBS pool.

"A borrower's best chance of avoiding foreclosure is to get help as quickly and efficiently as possible," said Herb Allison, president and chief executive officer of Fannie Mae. "These changes to our servicing policies are intended to remove administrative obstacles so that Fannie Mae borrowers can get the help they need and avoid foreclosure. It is important that all who have a stake in the recovery of the U.S. housing market -- including borrowers, investors and lenders -- work together to help limit foreclosures, which have both economic and human costs to communities across America. Investors in our MBS will continue to be entitled to receive the payments due on their investments, while Fannie Mae and servicers will have more tools to manage the risk of foreclosure during these unprecedented times."

These steps are the latest in a series of recent actions Fannie Mae has taken to help minimize home foreclosures. Fannie Mae is working with the Federal Housing Finance Agency and 27 lenders and servicers in the HOPE NOW alliance to launch SMP by December 15. Additionally, the company has directed servicers to suspend foreclosure sales and the completion of evictions on occupied single-family properties through January 9, 2009.

Today's announcements are more fully explained below.

New Servicer Guidance

Previously, Fannie Mae's foreclosure prevention efforts have generally been made available to a borrower only after a delinquency occurs. Under Fannie Mae's new guidance, loan servicers can and should use foreclosure prevention tools to assist distressed borrowers when a borrower demonstrates the need. As noted above, these guidelines apply to borrowers who are still current in their payments but whose default is reasonably foreseeable. This new guidance is effective immediately.

Early Workout(TM) Program

Under Fannie Mae's existing single-family workout practices, a borrower must sign documents to initiate a trial workout period during which time the servicer agrees to forbear from taking action against the borrower. When the trial workout period is over, the borrower must execute a new agreement to convert the workout to a permanent modification. Under Fannie Mae's Early Workout program, the borrower will sign a single document at the beginning of the process to establish a new monthly payment during a trial period. If the borrower successfully makes the new payments during the trial period, the workout will convert to a permanent modification. The Early Workout program can be used if a delinquency has either occurred or is confirmed to be reasonably foreseeable.

The Early Workout program adds to the efforts underway through the SMP, which will be the subject of a separate announcement to be released prior to the December 15, 2008 SMP implementation date. A modification under the SMP will be proactively offered to borrowers who have missed three payments and whose loans and financial conditions meet certain pre-set criteria. The Early Workout is an option available for any troubled Fannie Mae loan, regardless of delinquency status, when the borrower qualifies under our servicing guidelines. The terms of an Early Workout will depend on the servicer's assessment of an individual borrower's situation.

Longer Forbearance and Repayment Plan Periods

Servicers will now be able to offer forbearance and repayment plan arrangements for longer periods to most single-family borrowers. Whenever allowed by our MBS Trust documents, the maximum period of forbearance (when a borrower's payments are suspended or reduced) has been increased for most mortgages from 6 months to 12 months. Additionally, the maximum length of a repayment plan (when a borrower makes additional payments over an extended period to bring a loan current) has been increased for most mortgages from 18 months to 36 months, including any periods of forbearance.

New and Amended MBS Trust Documents

In connection with these changes, Fannie Mae issued a new 2009 Single-Family Master Trust Agreement, an Amended and Restated 2007 Single-Family Master Trust Agreement, a new Single-Family base Prospectus, and updates to its servicing guidelines.

Fannie Mae's MBS Trust agreements generally require that the servicer of an MBS mortgage loan remove the mortgage loan from the related MBS pool prior to modifying a loan. Generally, to facilitate a loan modification and avoid a foreclosure, servicers may request that Fannie Mae remove a loan from its MBS pool at any time after the loan has been in default for at least four consecutive monthly payments without a full cure of the delinquency.

The 2009 Single-Family Master Trust Agreement (MBS issued on or after January 1, 2009) and servicer guidance gives Fannie Mae servicers the flexibility, in extraordinary circumstances, to remove a loan from an MBS pool once the loan is one month delinquent for the purpose of a loan modification.

The MBS Trust documents, as well as the associated Single-Family base Prospectus that becomes effective January 1, 2009, have been posted online at:

Trust Documents: http://www.fanniemae.com/mbs/documents/mbs/trustindentures/index.jhtml?p=Mortg age-Backed+Securities&s=Prospectuses+%26+Related+Documents&t=MBS&q=Trust+Docum ents

Prospectus: http://www.fanniemae.com/mbs/documents/mbs/prospectus/index.jhtml?p=Mortgage-B acked+Securities&s=Prospectuses+%26+Related+Documents&t=MBS&q=Prospectuses

Investors should refer to the Trust agreements and the new base Prospectus for more detailed information. The current issue of MBSenger(R) also provides an overview of the changes described in this release.

Fannie Mae exists to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market. Fannie Mae has a federal charter and operates in America's secondary mortgage market to enhance the liquidity of the mortgage market by providing funds to mortgage bankers and other lenders so that they may lend to home buyers. In 2008, we mark our 70th year of service to America's housing market. Our job is to help those who house America.

-----
www.fayettefrontpage.com
Fayette Front Page
Community News You Can Use
Fayetteville, Peachtree City, Tyrone
www.georgiafrontpage.com
Georgia Front Page