Fannie Mae and Freddie Mac's mortgage modifications hit pandemic excessive

According to the latest monthly report from the Federal Housing Finance Agency, loan terms changes for financial troubles at Fannie Mae and Freddie Mac topped 5,000 for the first time since the coronavirus hit the United States in April.

The number of mortgages modified by the two state-sponsored companies rose from 4,849 in March to 5,271 and in April 2020 to 4,528, according to the FHFA's Foreclosure Prevention and Refinance Report. The monthly changes in the GSEs were last as high as 5,570 in March 2020.

Returning to more normal levels of modification for two major players in the home finance market could be a prelude to the wave expected since the arrival of the coronavirus and will be key to maximizing the number of distressed borrowers who can keep their homes.

"If they don't come up with a change plan, people with equity can choose to sell," said Selma Hepp, deputy chief economist at CoreLogic, on options for distressed borrowers. Also, a small fraction of them who lack equity may risk eventual foreclosure.

Home sale agreements with mortgage lenders may be preferable to foreclosures. They leave loan records intact, take less time, and can leave distressed borrowers with some profit if their home is worth more than they owe, which is increasingly likely as home values ​​continue to rise.

Of course, mods make up a small fraction of the home-maintenance options availed at the GSEs, and are far outperformed by a shrinking number of cease-and-desist plans. Deferral options, which allow borrowers who have been on suspension to resume their normal obligations and add missing payments at the end of the loan, are also far more common than changes. The payment deferrals at the GSEs rose very slightly in April to 55,970 from 55,570 in March.

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