Fannie Mae raises mortgage servicer incentives

NEW YORK (Reuters) - Fannie Mae (FNM.N) is raising the fees it pays servicing companies to renegotiate loans, aiming to cut costs by averting more mortgage defaults, the largest U.S. home funding provider said on Monday.

The new incentive fees are for repayment or loss mitigation plans starting Monday, Aug. 11. The fee change was announced on Fannie Mae's web site on Monday.

On Friday, Fannie Mae reported its fourth straight quarterly loss, citing rising credit losses on failing home loans for its worse-than-expected results.

"Incentive fees are only applicable to mortgage loans serviced under the special servicing option, in which Fannie Mae assumes the risk of loss from borrower default," the company said on its web site.

Fannie Mae said it will pay $700 for each successful modification completed on a conventional home loan, for example. The servicer also must stop charging the borrower $500 to cover administrative processing costs but can keep charging for out-of-pocket expenses for credit reports and other allowable documentation.

A spokeswoman was not immediately available on Monday to comment on the extent of the fee increases.

On July 31, Freddie Mac, the second largest U.S. home finance provider, boosted the incentives it pays mortgage servicers to help more borrowers renegotiate loans and curb rising delinquencies.

(Reporting by Lynn Adler)