Freddie Mac 2009 Annual Report Download - page 168

Table 64 presents the number of loans with foreclosure alternatives for 2009, 2008 and 2007.
Table 64 — Single-Family Foreclosure Alternatives
(1)
2009 2008 2007
(number of loans)
Loan modifications:
with no change in terms
(2)
........................................................... 5,866 10,122 5,096
with change in terms ............................................................... 56,511 24,962 3,009
with change in terms and principal forbearance ............................................. 2,667 — —
Total loan modifications
(3)
............................................................. 65,044 35,084 8,105
Repayment plans . . . . ............................................................... 33,725 42,062 38,809
Forbearance agreements .............................................................. 21,355 4,192 3,108
Pre-foreclosure sales . . ............................................................... 22,591 6,369 2,009
Foreclosure alternatives . . . . ......................................................... 142,715 87,707 52,031
2009 2008 2007
(loan balances, in millions)
Loan modifications
(3)
................................................................ $12,734 $6,406 $1,092
Forbearance agreements .............................................................. $ 4,382 $ 518 $ 343
Pre-foreclosure sales . . ............................................................... $ 5,295 $1,337 $ 258
(1) Based on completed actions with borrowers for loans within our single-family mortgage portfolio, excluding Structured Transactions and that portion of
Structured Securities that is backed by Ginnie Mae Certificates. Excludes those modification, repayment and forbearance activities for which the
borrower has started the required process, but the actions have not been made permanent, or effective. Our recent initiatives to address the growth of
delinquencies in our single-family mortgage portfolio have significantly increased the number of borrowers who started a foreclosure alternative during
2009, as compared to 2008.
(2) Under this modification type, past due amounts are added to the principal balance of the original contractual loan amount.
(3) Based on the number of modifications offered by our servicers and accepted, or acknowledged by us and the borrower during the period. Includes only
a portion of the completed loan modifications under HAMP during 2009 as reported by the MHA Program administrator, due to timing differences
associated with completion between us and the administrator.
We experienced significant increases in loan modifications as well as pre-foreclosure sales during 2009 compared to
2008. Loan modification may include additions of past due amounts to principal, interest rate reductions, term extensions
and principal forbearance. Since it was introduced in the second quarter of 2009, we have focused our loan modification
efforts on HAMP. HAMP requires borrowers to complete a trial period of three or more months before the loan is modified.
Borrowers did not begin entering into trial periods under HAMP in significant numbers until early in the third quarter of
2009 and, in many cases, trial periods extended beyond the initial three month period as HAMP guidelines were modified.
Based on information reported by the MHA Program administrator, we assisted more than 143,000 borrowers, of whom
more than 129,000 had made their first payment under the trial period and nearly 14,000 had completed modifications in the
HAMP process as of December 31, 2009. FHFA reported approximately 152,000 of our loans were in active trial periods as
of December 31, 2009, which includes loans in the trial period regardless of the first payment date. FHFA also reported
19,500 completed modifications of our loans under HAMP as of December 31, 2009, which includes modifications that are
pending the borrower’s acceptance. The completion rate for HAMP modifications, which is the percentage of borrowers that
successfully exit the trial period and receive final modifications, remains uncertain primarily due to the challenges faced by
servicers in implementing this program and the difficulty of obtaining income and other documentation from borrowers.
During 2009, approximately 8,400 borrowers, or 6% of those who had made the first trial period payment, dropped out of
the HAMP trial period process, primarily due to either the inability to continue payments under the program or inability to
complete the documentation requirements in accordance with the program.
As of December 31, 2009, the redefault rate for single-family loans that were modified (including those under HAMP
in 2009) during 2009 and 2008 was 29% and 52%, respectively. This redefault rate represents the percentage of such loans
becoming 90 days or more delinquent or in foreclosure as of December 31, 2009 that had been modified during the
respective year. We believe the redefault rate for loans modified in 2009 is likely to increase since this includes more
recently modified loans and both the housing and economic environments remain challenging.
Our servicers have a key role in the success of our loss mitigation activities. Through December 31, 2009, the majority
of our loss mitigation activity under HAMP has been primarily focused with our larger seller/servicers, which service the
majority of our loans, and variations in their approaches may cause fluctuations in HAMP processing volumes. Our seller/
servicers are currently processing a high volume of loans under HAMP. This reflects, in part, the substantial backlog of
delinquent loans our seller/servicers developed over recent periods, due to various foreclosure suspensions and the
implementation of HAMP. Once our larger seller/servicers finish processing this backlog of loans, it is possible that the
volume of loans processed under HAMP could decrease. Additionally, the significant increases in delinquent loan volume
and the challenging conditions of the mortgage market during 2008 and 2009 placed a strain on the loss mitigation resources
of many of our mortgage servicers. To the extent servicers do not complete loan modifications with eligible borrowers or are
unable to facilitate the increasing volume of foreclosures, our credit losses could increase.
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