Fannie, Freddie to revise, boost foreclosure plans

By Al Yoon and Patrick Rucker

LAS VEGAS/WASHINGTON (Reuters) - Fannie Mae (FNM.P) and Freddie Mac (FRE.P), the largest providers of U.S. home mortgage money, will likely revise foreclosure prevention efforts after the companies' main refinancing program reached fewer borrowers than policy-makers had hoped, their regulator said on Monday.

Disappointing results from the effort launched in November to reach homeowners and offer them easier terms on mortgages has strengthened the resolve of Fannie Mae and Freddie Mac, the regulator, and the mortgage servicing companies, to get more aggressive in their outreach, James Lockhart, director of the Federal Housing Finance Agency (FHFA) told Reuters.

Speaking to Reuters before a speech at an American Securitization Forum meeting in Las Vegas, Lockhart said the FHFA is working with other housing policy-makers to reach more borrowers and improve the streamlined loan modification program being implemented by Fannie Mae and Freddie Mac.

"The returns are not as rapid as we expected," he said. The plan for streamlined loan modifications "will probably need some tweaking as we go forward. We need to get very aggressive to keep people in their houses."

Lockhart is hoping guidance from the FHFA and the two government-controlled companies will standardize efforts of the mortgage servicing industry, where thousands of companies have been struggling to find the best ways to stem foreclosures.

After passing the hurdle of contacting borrowers, companies use a variety of methods to modify loans, including lowering interest rates, extending forbearance or cutting principal.

The Obama administration is crafting a mortgage-rescue program that would see Fannie Mae (FNM.P) and Freddie Mac (FRE.P) ease payments for hundreds of thousands of borrowers and offer a model for Wall Street to do the same, sources familiar with the plan said over the weekend.

Late last week, officials from the Treasury Department and Department of Housing and Urban Development worked with the FHFA to agree on standards for who could get relief and how they might coax other finance companies to follow their lead, said two industry sources familiar with the deliberations.

On Monday, Lockhart said the FHFA, working "in synch" with the Obama administration, will rely on the vast reach of Fannie Mae's and Freddie Mac's infrastructure as it ramps up foreclosure prevention efforts.

"We're hoping to have that very quickly," he said of revising the streamlined modification program.

Lockhart criticized other industry efforts, led by the American Securitization Forum, to streamline the modification process. It appears that there is "a lot more flexibility than has been used," by servicers to modify loans, he said in the text of his speech to the ASF.

The FHFA is working to break through other impediments to loan modifications, including clarifying rights to change terms of loans locked in securitizations, and easing the financial burden on servicers whose profits have been hurt as they advance payments on delinquent mortgages, he said.

American Home Mortgage Servicing Inc. has improved its funding by securitizing advances, a process that is costly but may be followed by others, he said. The company, owned by billionaire Wilbur Ross, last week agreed to buy servicing rights on a portfolio of home loans from Citigroup Inc., making it the largest U.S. subprime servicer, as Ross claimed.

The FHFA will "help them be more aggressive in loan modifications ... and to make sure they have strong financial backing," he said.