Freddie Mac Helping Homeowners Keep Their Homes

The U.S. housing crisis is one of the year's biggest news stories. In today's economic and social environment, Freddie Mac has stepped up and increased both the depth and breadth of our efforts to make home possible – and permanent.

One visible way is that the corporation has intensified activities to educate homeowners and lenders on how to avoid foreclosures. With Freddie Mac's help, tens of thousands of homeowners will be able to stay in their homes – stabilizing or even improving their economic outlook, while strengthening the neighborhoods and communities where they live.

Freddie Mac is increasing our efforts to assist homeowners by:

Using reinvigorated outreach and educational programs to inform homeowners on how to avoid foreclosure
Providing contemporary loan-modification approaches and other forward-thinking assistance to people who are at risk of losing their homes
Expanding early intervention with delinquent borrowers through specially trained teams

More Than 200 Outreach Events To Educate Borrowers

Freddie Mac has a strong borrower education and outreach program that's designed to touch borrowers at many points throughout the homeownership process.

For example, to prepare borrowers for homeownership, we offer consumer-focused tools and services, such as our award-winning CreditSmart® financial education curriculum, the Buying and Owning a Home section for consumers on FreddieMac.com, and Don't Borrow Trouble®, a national campaign aimed at preventing predatory lending practices and protecting homeownership. These and other Freddie Mac solutions include strong foreclosure avoidance and homeownership preservation components.

We also work closely with many local organizations to get the word out in their communities. In fact, last week we held a combined a Don't Borrow Trouble and CreditSmart summit with many of our participating organizations to discuss even more ways to reach borrowers who are at risk. We also send foreclosure avoidance experts across the country to speak with homeowners at housing events sponsored by government and non-profit agencies.

The volume of calls has been intense, but our servicers are ramping up their staff to answer consumers' needs, and additional funding from the government should also help housing counselors expand their activities. In the meantime, Freddie Mac has taken more steps to help homeowners and our servicers, including:

Providing a "Avoiding Foreclosure" link on the FreddieMac.com home page, directing site visitors to information in English and Spanish
Providing servicers and others with a free online Avoiding Foreclosure toolkit, available in English, Spanish, Chinese, Korean, and Vietnamese
Paying non-profit default counselors to contact borrowers who our servicers have been unable to contact during the first 45 days of delinquency, helping more than 6,000 families avoid foreclosure
Paying servicers $12 million in incentives through our Servicer Incentive Program for successfully preserving homeownership in 2007

Making a Difference Through Loan Modifications

Sometimes, however, borrowers are unable to avoid a difficult situation, and they find themselves behind on their mortgage payments, facing the possibility of foreclosure.

According to Freddie Mac VP Ingrid Beckles, "With foreclosure, everyone loses – the borrower, the lender, the community, and Freddie Mac. There are a lot of ways and resources for avoiding it, and Freddie Mac is working hard at providing that relief."

Freddie Mac works with both servicers and borrowers to provide assistance in the form of loan modifications, giving the borrowers a fresh start on their delinquent mortgage by reinstating the payments. The results are impressive.

In the first quarter of 2008, Freddie Mac and our servicers have already negotiated workouts for thousands of homeowners in economic distress, enabling more than 18,000 families facing financial hardship to stay in their homes. We are on target to approve more than 55,000 workouts for 2008, including 26,000 loan modifications.

Loan Modifications in Action

Loan modification involves modifying one or more of the original terms of a mortgage. For example, if a borrower loses her job, she may be unemployed for several months before finding employment. Even with a new job, the amount of the accumulated missed payments can be quite high, and the borrower often does not have enough funds to become current. She needs a loan modification. To conduct a loan modification, Freddie Mac processes all the loans through Workout Prospector® to ensure that each qualifying borrower receives a workout that is underwritten based on their specific financial condition. Options include:

Adding the unpaid delinquent amounts to the principal balance and recasting the payments over the remaining term
Providing additional relief by extending the term of the mortgage or modifying the interest rate to lower the monthly payments

Last year, Freddie Mac helped 47,000 delinquent borrowers avoid foreclosure, but we expect the numbers to be significantly higher this year as the organization continues to deliver a cohesive, integrated approach to homeownership preservation and foreclosure activities.