Foreclosure starts, mods on

Foreclosure, modification and short-term delinquency activity in government-sponsored enterprise loans increased during the third quarter as the phaseout of some pandemic-related relief got underway, although long-term distress declined.

Foreclosure starts jumped by 16% from the second quarter, rising to 7,253 from 6,233, according to the Federal Housing Finance Agency, the conservator and regulator for Fannie Mae and Freddie Mac. Much of the foreclosure activity allowed to proceed did so with new consumer protections in place.

Mods, in which borrowers with long-term income reductions obtain more affordable loan terms, rose 11% to 17,930 from 16,134. Also, the number of shorter-term delinquencies (60 days or less) grew, rising by 5% to 218,894 from 207,034.

However, the serious delinquency rate dropped to 1.55% from 1.99%, outperforming a 3.40% average for the mortgage market as a whole.

That said, serious delinquencies vary widely across the country, with the numbers in places like California being particularly high, spotlighting the importance of combining assistance available from the GSEs with state-distributed Homeowner Assistance Fund money in efforts to minimize remaining pandemic-related distress. The number of serious delinquent loans by state ranged from less than 1,000 in Idaho to nearly 54,000 in California.

The FHFA also also noted that the third quarter was a slow period for a program aimed at introducing more rate-reduction opportunities to low-income borrowers with high loan-to-value ratios in its Foreclosure Prevention and Refinance report. Just four such loans were reported, compared to 19 the previous quarter.

Those numbers could potentially grow if Freddie Mac, which the FHFA has called upon to increase its low-income refi activity, chooses to leverage this program in response.


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