UPDATE: FHFA: Troubled Mtges Concentrated In Non-GSE Mtges
13 März 2009 - 10:26PM
Dow Jones News
The regulator for Fannie Mae (FNM) and Freddie Mac (FRE) said
Friday that stemming the foreclosure crisis would require resolving
millions of troubled mortgages tied to securities that weren't
issued by the two mortgage giants.
So-called private-label securities, or PLS, are backed by 15% of
outstanding U.S. mortgages, but represent roughly half of all
serious mortgage delinquencies, Federal Housing Agency Director
James B. Lockhart said in a speech here.
"If we are going to stabilize the housing market, we have to
address that PLS 50%," he said.
There are signs the foreclosure problem is deepening. The number
of homes lost to bank repossessions spiked in February despite
halts on foreclosures announced by the three largest U.S. mortgage
servicers. About 74,000 homes were lost to foreclosure during
February, up from 67,000 in January, according to RealtyTrac.
Lockhart suggested that Fannie and Freddie could help cure the
problem by setting an example of aggressively modifying troubled
loans. Last year, the mortgage giants launched a program for
streamlined modifications of the loans they own or guarantee. The
Obama administration launched a separate program this month to pay
mortgage servicers financial incentives to modify loans.
Lockhart reiterated that he has been urging Treasury to provide
financial assistance to private mortgage servicers. The housing
bust has crippled the companies, which in turn has hampered
Fannie's and Freddie's ability to meet low- to moderate-income
borrowers, he said.
Fannie and Freddie are forbidden by their government charter to
buy or guarantee loans with a loan-to-value ratio higher than 80%
unless the loan is partially insured or has another form of credit
enhancement. Such high loan-to-value mortgages often benefit poorer
borrowers.
Partly as a result of the mortgage insurers' woes, Fannie and
Freddie will likely fail all of their affordable housing goals for
2008, Lockhart said. FHFA must overhaul the companies' affordable
housing goals by 2010.
Lockhart said he plans to release 2009 goals for the companies
soon, which will be tougher than the 2008 guidelines.
-By Jessica Holzer, Dow Jones Newswires; 202-862-9228;
jessica.holzer@dowjones.com