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Fannie Cracks the Foreclosure Whip



Servicers warned to meet timelines or face fines
Friday, September 3, 2010
Fannie Mae says it will begin fining loan servicers who take too
long to complete foreclosures once it’s been determined that
delinquent borrowers don’t qualify for a loan modification or
other alternatives like short sales.
The fines — or “compensatory fees” — will be assessed when
loan servicers can’t provide a reasonable explanation for failing
to meet timelines for completing routine foreclosures that vary
from state to state, Fannie Mae said in a bulletin to servicers.
The time allotted to complete a foreclosure, starting from the
referral of a loan file to an attorney or trustee until the date of a
foreclosure sale, varies from as little as 60 days in Georgia,
Michigan, Missouri, Tennessee, Texas, Virginia and West
Virginia, to 300 days or more in Illinois, Maine, New Jersey, New York, Vermont and Wisconsin.
The foreclosure timelines Fannie Mae has established for the four states hit hardest by
foreclosure during the downturn fall in between: 120 days in California and Arizona, 150 days in
Nevada, and 185 days in Florida.
Fannie Mae said the foreclosure schedules it’s established for each state represent the time
“typically required for routine, uncontested foreclosure proceedings, given the legal
requirements of the applicable jurisdiction.” The timeline in Florida, for example, was extended
by 35 days to allow for a state-mandated mediation process.
Fannie Mae promised it “will not impose compensatory fees for delays beyond the control of the
servicer, such as unavoidable mediation or court delays, or sales delays by sheriffs or other
selling officers.”
When fines are levied, they will be based on the outstanding principal balance of the mortgage
loan, the rate of return paid to investors in mortgage-backed securities backed by the loan, the
length of the delay, and any additional costs directly attributable to the delay.
According to mortgage data aggregator Lender Processing Services, an estimated 2.02 million
homeowners were in foreclosure in July nationwide. Another 5.02 million homeowners were
behind on their mortgages.
On average, borrowers in foreclosure were 469 days behind on their mortgage payments, up
from 351 days a year ago and 196 days in January 2009, LPS said.
Properties that are vacant and held off the market, combined with whatever portion of homes
with delinquent mortgages that are not currently listed for sale, “represent a shadow inventory
putting downward pressure on both home prices and rents,” Fannie Mae warned in the
company’s most recent quarterly report to investors.
According to the report, 4.99 percent of the roughly 9 million single-family loans securitized into
mortgage-backed securities guaranteed by Fannie Mae were seriously delinquent or in the
foreclosure process as of June 30 — about 450,000 loans.
Of those, about 170,000 were in foreclosure. About two-thirds of seriously delinquent loans had
been delinquent for more than 180 days.
In the first half of 2010, Fannie Mae’s loan servicers negotiated 276,059 loan workouts — more
than three times as many as the same time period the year before.
Fannie Mae’s loan servicers also signed off on 38,841 short sales and deeds-in-lieu of
foreclosure during the first half of 2010, a 171 percent increase from the same period a year ago
that nearly matched the total for all of 2009.
Fannie Mae nevertheless acquired 130,767 properties through foreclosure in the first half of the
year, up from 57,469 during the first half of 2009.
At the end of the foreclosure process, loan servicers schedule properties for auction. If nobody
bids for a property, or if the bids that are received fall short of the properties’ estimated worth,
Fannie Mae takes possession of the home and handles its resale.
The company was only able to sell 87,612 of the properties it acquired through foreclosure in
the first half of 2010, leaving it with an REO inventory of 129,310 homes valued at $13 billion

Servicers warned to meet timelines or face finesFriday, September 3, 2010Fannie Mae says it will begin fining loan servicers who take toolong to complete foreclosures once it’s been determined thatdelinquent borrowers don’t qualify for a loan modification orother alternatives like short sales.The fines — or “compensatory fees” — will be assessed whenloan servicers can’t provide a reasonable explanation for failingto meet timelines for completing routine foreclosures that varyfrom state to state, Fannie Mae said in a bulletin to servicers.The time allotted to complete a foreclosure, starting from thereferral of a loan file to an attorney or trustee until the date of aforeclosure sale, varies from as little as 60 days in Georgia,Michigan, Missouri, Tennessee, Texas, Virginia and WestVirginia, to 300 days or more in Illinois, Maine, New Jersey, New York, Vermont and Wisconsin.The foreclosure timelines Fannie Mae has established for the four states hit hardest byforeclosure during the downturn fall in between: 120 days in California and Arizona, 150 days inNevada, and 185 days in Florida.Fannie Mae said the foreclosure schedules it’s established for each state represent the time”typically required for routine, uncontested foreclosure proceedings, given the legalrequirements of the applicable jurisdiction.” The timeline in Florida, for example, was extendedby 35 days to allow for a state-mandated mediation process.Fannie Mae promised it “will not impose compensatory fees for delays beyond the control of theservicer, such as unavoidable mediation or court delays, or sales delays by sheriffs or otherselling officers.”When fines are levied, they will be based on the outstanding principal balance of the mortgageloan, the rate of return paid to investors in mortgage-backed securities backed by the loan, thelength of the delay, and any additional costs directly attributable to the delay.According to mortgage data aggregator Lender Processing Services, an estimated 2.02 millionhomeowners were in foreclosure in July nationwide. Another 5.02 million homeowners werebehind on their mortgages.On average, borrowers in foreclosure were 469 days behind on their mortgage payments, upfrom 351 days a year ago and 196 days in January 2009, LPS said.Properties that are vacant and held off the market, combined with whatever portion of homeswith delinquent mortgages that are not currently listed for sale, “represent a shadow inventoryputting downward pressure on both home prices and rents,” Fannie Mae warned in thecompany’s most recent quarterly report to investors.According to the report, 4.99 percent of the roughly 9 million single-family loans securitized intomortgage-backed securities guaranteed by Fannie Mae were seriously delinquent or in theforeclosure process as of June 30 — about 450,000 loans.Of those, about 170,000 were in foreclosure. About two-thirds of seriously delinquent loans hadbeen delinquent for more than 180 days.In the first half of 2010, Fannie Mae’s loan servicers negotiated 276,059 loan workouts — morethan three times as many as the same time period the year before.Fannie Mae’s loan servicers also signed off on 38,841 short sales and deeds-in-lieu offoreclosure during the first half of 2010, a 171 percent increase from the same period a year agothat nearly matched the total for all of 2009.Fannie Mae nevertheless acquired 130,767 properties through foreclosure in the first half of theyear, up from 57,469 during the first half of 2009.At the end of the foreclosure process, loan servicers schedule properties for auction. If nobodybids for a property, or if the bids that are received fall short of the properties’ estimated worth,Fannie Mae takes possession of the home and handles its resale.The company was only able to sell 87,612 of the properties it acquired through foreclosure inthe first half of 2010, leaving it with an REO inventory of 129,310 homes valued at $13 billion.

By Inman News

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