Should we have a foreclosure moratorium?

Should we have a foreclosure moratorium?

July 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.
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