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Should we have a foreclosure moratorium?

National Mortgage Professional
Jul 30, 2007

Shifting reasons behind single-family late paymentsMortgagePress.comForeclosure prevention A new analysis of 2006 mortgage delinquencies in Freddie Mac's portfolio of 10 million single-family prime loans reflects recent increases in payroll jobs, but also shows the impact of rising health care costs and personal debt on a growing number of borrowers. The analysis excludes delinquent loans in Louisiana and Mississippi due to the effects of the 2005 hurricanes. At the end of 2006, only 0.53 percent of Freddie Mac-owned single-family loans were 90 or more days delinquent or in foreclosure, down from 0.69 percent at the end of 2005. Freddie Mac's single-family delinquencies are still at 0.53 percent, according to the March monthly volume summary Freddie Mac also released. Nationally, severe prime conventional loan delinquencies ended 2006 at 0.86 percent, according to data from the Mortgage Bankers Association. Unemployment and income losses were linked to far fewer delinquencies on Freddie Mac-owned loans in 2006 than in prior years, the company said. Job or income loss caused 36 percent of delinquencies in 2006 compared to 43 percent between 2001 and 2005. But delinquencies caused by excessive borrower financial obligations rose to 13.6 percent last year, versus 11.1 percent, while late payments linked to family or borrower illnesses rose from 19.2 percent to 21.1 percent. "This analysis underscores the magnitude of difference between Freddie Mac's 0.53 severe delinquency rate and those in the sub-prime market," said Freddie Mac Chief Economist Frank Nothaft. "The drop in job- and income-related delinquencies reflects the growth we've seen in payroll jobs, excluding the manufacturing sector, but the uptick in late payments due to excessive debt is potentially troubling because it is independent of economic trends and suggests some borrowers are having a harder time handling their financial obligations than in past years." "Freddie Mac's very low delinquency rate is testimony to our risk management and efforts to inform borrowers about their workout options while giving broad authority and financial incentives to servicers to successfully help borrowers early in the delinquency cycle," said Ingrid Beckles, vice president of servicing and asset management at Freddie Mac. "By working together, Freddie Mac and its servicers are helping more than 40,000 delinquent borrowers a year get back on track and stay in their homes." Freddie Mac requires mortgage servicers to explore several workout options with late-paying borrowers. These options include forbearance (which temporarily delays or reduces payments), repayment plans or loan modifications that can restructure the payment terms for a fixed period. Many servicers typically describe these options in their collection letters. However, it is up to borrowers to follow up with their servicers to learn more about these options. For more information, visit www.freddiemac.com.
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