Freddie Mac (FRE), one of the nation’s largest investors in residential mortgages, announced on Thursday the doubling of the financial incentives it pays for each workout that keeps a delinquent borrower with Freddie-owned loans avoid foreclosure.
Beginning Friday, August 1, 2008, compensation for repayment plans will jump to $500 from $250 while loan modification compensation will increase from $400 to $800. For pre-foreclosure sales, under which Freddie Mac accepts less than the full amount owed on a borrower’s loan, compensation will go from $1,100 to $2,200.
Freddie Mac also announced it will start reimbursing servicers for the cost of door-to-door outreach programs and give servicers more time to negotiate workouts in states with fast foreclosure processes. Servicers will be reimbursed up to $200 for additional fees paid to vendors for door knocking that results in successful alternatives to foreclosure. This policy is effective from August 1, 2008, through March 31, 2009.
To qualify for the reimbursement, the servicer must show that the mortgage was at least 90 days delinquent, the servicer had no prior contact with the borrower, and that the outreach was done by an independent third party vendor.
Freddie Mac will also extend the time for foreclosures so servicers will have more time, if needed, to negotiate workouts with delinquent borrowers in Washington, DC, and 20 states with relatively fast foreclosure processes. Servicers will be given up to 10 months from the due date of the last payment to the foreclosure sale.
Giving our servicers more time and greater compensation to help troubled borrowers is fundamental to preserving homeownership and maximizing our efforts to minimize foreclosures,” Vice President of Servicing and Asset Management Ingrid Beckles said.
Freddie Mac (the Federal Home Loan Mortgage Corporation) is a government sponsored enterprise (GSE) and a stockholder-owned corporation established by Congress in 1970 to provide liquidity, stability and affordability to the nation’s residential mortgage markets. Together with the Federal National Mortgage Association, founded in 1938, otherwise known as Fannie Mae (FNM) – both GSEs own or guarantee about half of the U.S.’s $12 trillion mortgage market.
Even though we are told of instances of foreclosure in terms of statistics, to so many, it’s a story of a family member or friend that they know.
I’m not sure who to blame – the owner who could’ve taken different actions to avoid foreclosure or the banks and government who do such a poor job of keeping homeowners informed with all their small-print info.
It’s a spiral where everyone is chasing and blaming someone else. But one thing that we all can agree on in difficult times like this is that it’s a downward spiral that is collectively drowning us as a whole nation that once was prosperous and less wounded.