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Washington Post
Wednesday, February 4, 2009; Page D04
By Renae Merle
Freddie Mac announced a pilot program yesterday targeting 5,000 delinquent
borrowers who have high-risk mortgages.
Under the program, Freddie Mac will pay an outside company to launch an
intensified effort to reach a subset of homeowners who have missed two mortgage
payments. The program will attempt to speed the homeowners through the loan-modification
process, which could include lowering their interest rate or extending the terms
of their loan. The idea is to put more effort into specific types of high-risk
loans, including Alt-A loans, a category that typically has not required
borrowers to document income. Those loans make up a small portion of Freddie's
portfolio, but half its delinquencies, spokesman Brad German said. McLean-based Freddie
Mac finances millions of mortgages a year and has faced increasing losses from
foreclosures. The latest program is an acknowledgment of the frustration of many
distressed
For example, one goal is to minimize the time borrowers wait on the phone. The
aim is to reduce the redefault rate on troubled mortgages -- borrowers who fall
behind on their payments again after having their mortgage modified -- and cut
foreclosures, German said. This comes when government and industry
foreclosure-prevention programs have come under increasing criticism. Several reports have
shown that many borrowers have quickly fallen back into default after their loan
modification, raising questions about whether they have been receiving affordable
loans. Freddie Mac has hired Ocwen, a Florida-based mortgage servicer, for the
program, but German said others are being considered.
Ocwen manages subprime loans for lenders and investors. It has touted its
efforts to modify loans of distressed homeowners and is known for cutting principal in
some cases, a practice rejected by many lenders. Freddie Mac does not plan to
include principal reductions in its pilot program. German said Freddie Mac would
not release the cost of the program. The program is expected to focus on states
with high delinquency rates, such as California and Nevada, German said, but
could extend to other parts of the country, including the Washington region.
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