Fannie Mae has introduced a program under which servicers can offer unsecured loans to delinquent homeowners for the amount past due on their mortgages so the borrowers can cure their defaults and avoid foreclosure.
The HomeSaver Advance program should help reduce the number of delinquent mortgages that the Washington government-sponsored enterprise must repurchase from its securitization trusts and therefore reduce the fair-value losses it has to record on those purchases, Fannie said. (Such repurchases are necessary in order for the mortgages to modified.)
The program is being rolled out and will be available to all Fannie Mae servicers by April 15.
In December, Freddie Mac ended its practice of buying past-due loans out of pools it guaranteed after four months of delinquency, and now does so only under more extreme circumstances, such as a foreclosure or modification.
The change is likely to improve Freddie's results under generally accepted accounting principles this quarter.
As a result of the new policy, Freddie purchased only $4 million of such seriously delinquent loans in December, compared to $1.2 billion in October and $1.4 billion in November.
Freddie had to take large market-value hits on the loans it purchased — roughly 38 cents on the dollar in the fourth quarter. (In the first quarter such loans carried only a 14% market discount to face value, and Freddie purchased $1.8 billion of them for the entire period, the GSE said.)
"We're already providing in our credit provision for these loans, and they're off balance sheet, and then by virtue of putting them on balance sheet, we add dramatically to the expected credit [loss], and that's not reality," Anthony S. Piszel, Freddie's chief financial officer, said in an interview last week.
For October and November, the practice resulted in about $800 million of losses, versus about $100 million in provisions, he said.
"As the credit spreads just continue to blow out, the exaggeration of the impact of this has just gotten absurd," Mr. Piszel said. But this year repurchases will "continue at a low level and be very manageable," he said.
In the fourth quarter, Freddie also recognized a $273 million gain from "the recapture of previously recognized market value losses on purchased loans due to either borrower payoffs or property fair values upon foreclosure that exceeded the carrying basis of the loan," the company said.
