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Drop in Foreclosed Properties on Sale from Fed Has Upshot

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By : John Cutts    99 or more times read
The drop in foreclosed properties on sale from Fannie Mae and its sister company Freddie Mac in the last months of 2009 despite the increase in mortgage defaults has an undesirable upshot, according to taxpayer advocates.

Taxpayer advocates claim that the drop in completed foreclosures of Fannie- and Freddie-backed loans despite the rise in defaults on government-backed loans showed that Fannie and Freddie canceled a lot of foreclosure starts in the last months of 2009 and provided more time for homeowners to pursue their loan modification efforts, in addition to earlier moratoriums, extensions and accommodations already given to them.

Advocates argue that these actions are only delaying the inevitable which is foreclosure for many delinquent borrowers who should bear the consequences of their actions and who should not put their burdens on the shoulders of responsible taxpayers who have been sacrificing in making their mortgages current.

According to analysts, the increase in foreclosure cancellations in the last months of 2009 will subsequently increase the losses of Freddie and Fannie and ultimately increase the losses of taxpayers, who are continuously bailing out collapsing financial enterprises.

For instance, in Los Angeles County alone, almost 10,000 residential units headed for listings of foreclosed properties on sale since September last year have been held back by moratoriums which are only delaying the inevitable and by the Home Affordable Modification Program, which has largely failed.

In the foreclosure prevention report released by the Federal Housing Finance Agency for its third quarter 2009 performance, 405,000 of the almost 700,000 mortgage loans in modification were loans backed by Freddie and Fannie. Together with the 7.6-percent distress rate in Fannie and Freddie loans, it is no wonder that the total number of federal homes for sale, including FHA foreclosures and other government foreclosures for sale are still high.

Without the HAMP program and other foreclosure prevention programs, which have been delaying the completion of foreclosures, more government properties could have been included in real estate owned listings.

Out of the almost 700,000 mortgages in trial modifications, only around 4 percent or about 31,000 loans have been turned into permanent modifications.

According to the FHFA, the default rates on Fannie and Freddie-backed mortgages rose to 7.6 percent in the third quarter, despite intensified efforts by the Obama administration to significantly cut down the number of foreclosed properties on sale across the nation.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.

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