New Rules at Freddie Mac Likely To Backfire

Freddie Mac is boosting incentives to servicers as well as doubling the length of time it is giving servicers to foreclose.

Inquiring minds may wish to consider Freddie Mac Pushes Out Foreclosure Timelines [Housingwire]:

Pressure to raise servicer spreads may have just gotten a little more intense on Thursday, with Freddie Mac (FRE) announcing a huge, mixed bag of changes to its servicing guidelines — including doubling the amount of money it pays for each workout alternative, and lengthening foreclosure timelines in key states. The GSE also said it would start reimbursing servicers for the cost of door-to-door outreach programs, and make administrative changes intended to streamline the workout process.

Perhaps the boldest move by Freddie Mac on Thursday — and one that won’t get much press attention — was its decision to eliminate foreclosure timeline compensation altogether for servicers, effective immediately. In other words, servicers will no longer earn a bonus based on how quickly they can foreclose.

If that doesn’t scream “modify more loans,” then the GSE’s decision to double compensation for servicers in completing workouts certainly will. Freddie said it will now pay servicers $800 for a loan modification, $2,200 for a short payoff or make-whole preforeclosure sale, and $500 per repayment plan. Deeds-in-lieu of foreclosure didn’t get Freddie’s same endorsement, however, and will remain at the current incentive level of $250, the GSE said. [more]

Free Rent

I was speaking with Aaron Krowne at

Mortgage Lender Implode-O-Meter

this weekend and we briefly discussed "New Rules" at Freddie.

We both think that doubling the length of time to do a workout is just begging freeloaders to take advantage.Those who have made up their minds to walk away, may now be able to live rent free for 10 months before the foreclosure proceedings start.

Assume a $2,000 mortgage payment. 10 months non-payment would allow someone to save up $20,000 before walking away. That's one hell of an incentive Freddie is offering someone who is making a walk, no-walk decision.

And what's the point of huge incentives to do workouts if "previous loan modifications aren’t sticking"? One possible answer is that Freddie has resorted to praying for a miracle, and that housing picks up in 2009. An alternate answer is that Freddie may be so stuffed to the gills with foreclosures that it simply cannot handle any more.

Sorry, Freddie, there will be no 2009 recovery miracle with unemployment soaring. Nor will these workout schemes do anything but delay, at great expense, the chargeoffs.

Comments

[poncawolf:]

Clinton: 'I never made a racist comment'


Those Poor People – In That Hurricane – Had there house’s blown away – and flooding caused them to – Run to high ground – But they made it – Most of them – and there okay – waiting for the food to get there – after all – They live like that every day – so it’s good enough for them.

You see I don’t have too – come out and say – all those “blanks” – are used to not having anything – do a fly over – and that’s good enough for them.

I am guilty of racism – If I even - liken – people unto – what is racism.

Nobody is basically at fault – These are the things we all work on – It’s what we have been told and shown – and took as our own beliefs – and a lot of times – we are unaware – we have done it – kind of like – showing a person – and flashing – a image – of a dead cat behind a person – we then take on a belief – that person just killed that poor cat – even if our – up-front mind – does not see it – we have a grotesque image of that person.

We simply judge people – by what we have heard – and shown them to be – simply based on our simple side.

Basic primal instincts – not any body’s fault – but what we must become awaken society – That must become aware of – of such primal instincts and overcome - Our primal – Judge mental survival instincts – otherwise – we will always fall – for a simple flash of food during a movie – and run and get it.

Easy Predatory – Tactic.

2008 Aug 04 03:14 PM

[buyitcheaper:]

$800 for a loan mod? There should be hoards of cold callers calling these delinquent homeowners and offering a 40 year term at 6.5% if for no other reason than desperation. What a way to reward the undisciplined.

2008 Aug 04 08:05 PM