Since being placed in conservatorship, Fannie Mae and Freddie Mac have greatly ramped up their loan modification efforts, observers said.

Making before-and-after comparisons is difficult since many of the programs were started before Fannie and Freddie were taken over on Sept. 7 by the Federal Housing Finance Agency. But market watchers said the efforts have gained new momentum since the takeover, which essentially freed both government-sponsored enterprises to focus on delinquent borrowers rather than capital raising.

"Because of the government takeover, they're getting all the money they need, so they're increasing loan modifications and recasting mortgages based on what the borrower can pay," said Terry Couto, a partner in the Tampa office of Newbold Advisors LLC of Bethesda, Md.

Jeffrey Garfinkle, a partner at the Irvine, Calif., law firm Buchalter Nemer who represents several companies that service loans for the GSEs, agreed that there has been "a change in terms of how aggressive they've become at saving borrowers."

"They are going to extraordinary lengths, spending a lot of time, effort, and money to make loans current and performing, and to avoid foreclosure — even if it's at extremely low rates and converting balloon rates," Mr. Garfinkle said.

Brian Faith, a spokesman for Fannie, said that in the past five weeks it has kept 3,100 borrowers from being foreclosed on, or roughly 40% of its foreclosed loans that were under review. Another 13,847 delinquent at-risk borrowers have received loan modifications and were kept out of foreclosure, or roughly 80% of at-risk loans that were reviewed, he said.

According to a report released by the FHFA last week, Fannie and Freddie combined offered an average of 12,193 workouts a month (including payment plans and loan modifications) in the first quarter, 54% more than the monthly average for all of last year.

Fannie and Freddie initiated 36,173 foreclosures a month in the first quarter, 60% more than last year, the report found.

Mr. Faith said Fannie is reviewing another 27,000 foreclosures that have been referred by seller-servicers. In some instances it is pulling back cases from foreclosure attorneys and returning the loans to servicers for review, he said. Depending on the circumstances, Fannie servicers "will lower the interest rate below market for a period of time to let a borrower get back on their feet," and "will extend the term to 40 years in some cases to help lower the monthly payment."

Brad German, a spokesman for Freddie, said it had completed 48,000 loan modifications or workouts by mid-September as part of a program it started in April. Freddie is on track to modify a total of 82,000 delinquent loans this year that had been headed into foreclosure, he said. Its mass modification pilot program lowers interest rates by 2 percentage points below a borrower's current rate and extends the term to 40 years.

"It is showing an increase in momentum, month to month, as it becomes more embedded within servicer shops," Mr. German said.

Gibran Nicholas, the chairman of the CMPS Institute of Ann Arbor, Mich., which offers professional certifications for mortgage bankers and brokers, said that a continued drop in housing prices could make many modifications moot.

"If you just modify the interest rates … but don't write down the principal, then if the market doesn't recover the borrower will still owe more than the value of their home," Mr. Nicholas said. "If housing values continue to decline and there's no recovery over the next five years, then perhaps everyone would have been better off foreclosing. That's the big unknown."

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