GSEs Bolstering Foreclosure Prevention Efforts.(Managing REO)

Byline: Brian Collins

Washington-Fannie Mae and Freddie Mac have stepped up their foreclosure prevention efforts now that the two mortgage giants are operating in conservatorships and under the tight control of their regulator.

Federal Housing Finance Agency director James Lockhart told a congressional panel the government-sponsored enterprises will be taking a "systematic approach" to loan modifications.

"Going forward, we will work with the CEOs to modify business practices, such as the lengthy delay before pulling delinquent loans from securitized pools. Practices such as this were motivated by capital concerns, but undermined efforts to help distressed borrowers," Mr. Lockhart testified Sept. 25 before the House Financial Services Committee.

The new chief executives of Fannie and Freddie testified that their shops have increased incentives for servicers to provide borrowers with workout options to stay in their homes.

"We are in the process of increasing our use of specialty servicers skilled in problem loan workouts," Fannie president and CEO Herbert Allison told the committee. He also noted that the HomeSaver program, which provides personal loans of up to $15,000 to help borrowers to catch up on their payments, has helped nearly 38,000 homeowners.

In its last quarterly financial report, Fannie said servicers had made 17,900 HomeSaver advances to delinquent borrowers as of June 30.