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26 FHFA: GSES COMPLETED NEARLY 66,000 FORECLOSURE PREVENTION ACTIONS IN Q4 2014 Fannie Mae and Freddie Mac completed 65,900 foreclosure prevention actions in the fourth quarter of 2014, which included loan modifications, repayment plans, forbearance plans, short sales, and deeds-in-lieu of foreclosure, according to the FHFA's Q 4 2014 Foreclosure Prevention Report. According to FHFA, nearly 41,000 of those 65,900 foreclosure prevention actions—62 percent— completed in Q 4 were permanent loan modifications; 33 percent of borrowers who received loan mods had their payments reduced by 30 percent or more, according to FHFA. Approximately 11,300 borrowers remained in their homes after agreeing to repayment plans, and about 2,500 received forbearance plans, according to FHFA. e total number of home retention actions during the quarter was approximately 55,000, down slightly from Q 3's total of nearly 60,000. e number of overall foreclosure prevention actions, including home forfeiture actions, declined slightly quarter- over-quarter in Q 4 from 72,700 to 65,900. "Keeping families in their homes continues to be a top priority for Freddie Mac and we exhaust every workout option to do so," Freddie Mac recently said on its blog. e number of home forfeiture actions completed in Q 4 also declined slightly from Q 3 (12,900 compared to 10,800). Short sales for Q 4 totaled 7,600, while about 3,200 borrowers received a deed-in-lieu of foreclosure, according to FHFA. Fourth-quarter foreclosure prevention actions completed by the GSEs lifted the total number of such actions in 2014 to 307,200 and the total since the GSEs were taken into conservatorship by the FHFA in 2008 up to 3.4 million. e serious delinquency rate (90 days or more past due or in bankruptcy or foreclosure) on loans backed by the GSEs dropped to 1.9 percent in the fourth quarter, near pre-crisis levels. By comparison, the serious delinquency rate on Federal Housing Administration (FHA) loans in Q 4 was 6.0 percent, and for Veterans Affairs (VA) loans it was 3.4 percent, according to FHFA. e nationwide serious delinquency average for all loans during the quarter was 4.5 percent. ird-party sales and foreclosure sales (completed foreclosures) on GSE loans declined in Q 4 by 7 percent, down to 36,200. Foreclosure starts experienced a slight decline, down to 74,000. REO inventory fell by 8 percent, down to 111,000 during Q 4, according to FHFA. Approximately 2.8 million foreclosure prevention actions—82 percent—completed by the GSEs since 2008 helped homeowners stay in their homes, and about 1.8 million of those homeowners received permanent loan modifications. More than 1 million homeowners received a form of assistance such as a repayment of forbearance plan to allow them to remain in their homes. About 605,000 homeowners received assistance in the form of short sales or deeds-in-lieu that allowed them to leave their homes without foreclosure. FORMER FANNIE MAE CEO CLAIMS SEC FAILED TO PROVE ACCUSATIONS OF SUBPRIME LENDING FRAUD Former Fannie Mae CEO Daniel Mudd told a judge he did not believe the U.S. Securities and Exchange Commission (SEC) had proven its claims that the government- sponsored enterprise was guilty of fraud in regards to its subprime mortgage portfolio in the run-up to the financial crisis. Mudd, the CEO of Fannie Mae during the years leading up to the housing crash (2005 to 2008), and former Fannie Mae executives Enrico Dallavecchia (chief risk officer) and omas A. Lund (EVP), requested Judge Paul Crotty in the U.S. District Court of the Southern District of New York grant them summary judgment on the grounds that the SEC had not shown evidence that the GSE misled or made false statements to investors about its subprime portfolio. e SEC sued the Fannie Mae executives in December 2011, claiming they attempted to shield from investors the amount of subprime and high-risk mortgage loans held by the agency by omitting two types of loans known as "Expanded Approval" and "MyCommunity- Mortgage" loans from financial statements. "Fannie Mae and Freddie Mac executives told the world that their subprime exposure was substantially smaller than it really was," said Robert Khuzami, director of the SEC's enforcement division, at the time the lawsuit was filed. "ese material misstatements occurred during a time of acute investor interest in financial institutions' exposure to subprime loans, and misled the market about the amount of risk on the company's books. All individuals, regardless of their rank or position, will be held accountable for perpetu- ating half-truths or misrepresentations about matters materially important to the interest of our country's investors." e executives responded by saying Expand- ed Approval and MyCommunityMortgage loans, which were intended for borrowers with weaker credit, were excluded from the financial statements because they did not qualify as subprime loans under Fannie Mae's own quali- fication guidelines, according to reports. e defendants contend investors had access to the Fannie Mae guidelines that define a subprime loan, and a reasonable investor could have used that information to make informed judgments as to the agency's involvement in subprime loans or any other type of mortgage loan. According to reports, the SEC's complaint alleged a Fannie Mae 2007 public filing said the extent of the agency's involvement in single- family subprime mortgage loans amounted to $4.8 billion; however, the agency held more than $57 billion worth of Expanded Approval and MyCommunityMortgage loans. In February 2008, which was seven months before Fannie Mae and Freddie Mac were taken into con- servatorship by the Federal Housing Finance Agnecy, Fannie Mae reportedly had $90 billion worth of loans on the books but claimed only a small percentage of that was subprime loans. Crotty rejected a motion by the defendants in 2012 to have the SEC lawsuit dimissed; at that time, the judge called it "misleading" to not count Expanded Approval and MyCommunity Mortgage Loans as subprime loans.

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