Combined, Fannie Mae/Freddie Mac REO Assets Approaching 100,000

Fannie Mae and Freddie Mac are approaching a combined total of 100,000 in real estate-owned assets with Fannie at 63,000 and Freddie, 35,000, according to former director of FHFA James B. Lockhart III. As a featured speaker at The Five Star Default Servicing Conference and Expo in Fort Worth, Mr. Lockhart said while HAMP and HARP are getting borrowers into safer mortgages, everyone is waiting to see if the modifications take or if they will re-default quickly. Their history has not been good, he said. Based on first quarter 2008 data, Fannie and Freddie only lowered payments for 3%. "If you aren't lowering payments, it's not surprising you are not getting good results." He did say there was a more dramatic change in the second quarter, which will hopefully help more people stay current. Fannie and Freddie have lowered interest rates from 6.5% to 5%. Unfortunately, economic trends and growing unemployment could still hurt the market. Looking at the future of Fannie and Freddie, with 5.5 trillion of mortgage exposure, he said the industry has to decide what it wants the secondary market to look like. "Up a until a year and a half ago, it was a successful secondary mortgage market. We allowed them to leverage themselves too much. They gave people cheaper mortgages than they should have had and now taxpayers are paying for it." As to whether there will be a private label market comeback, he said it will take some time for that to happen, adding that it is important to divide the private from the public sector. "If you don't draw the lines clearly you have what we had. We had the private sector taking profits and then the public picking up the losses. That was the big problem. We need a better understanding of what the private-public sector should be."