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10 GSEs' SERIOUS DELINQUENCY RATE IS LOWEST SINCE START OF CONSERVATORSHIP As a sign that mortgages backed by Fannie Mae and Freddie Mac are performing better is the consistent decline in the serious delinquency rate on residential loans insured by the GSEs, which is now at a level comparable to what it was in September 2008 at the start of the conservatorships. According to the Federal Housing Finance Agency (FHFA)'s November 2015 Foreclosure Report released Tuesday, 1.50 percent of mortgages backed by the GSEs were seriously delinquent as of the end of November 2015, which is the lowest level since the conservatorships began. e rate for both Fannie Mae- and Freddie Mac-backed loans has been steadily declining since 2010. "What we're seeing is that fewer loans are going 90 days or more delinquent," said Naa Awaa Tagoe, Sr. Associate Director, Division of Housing Mission & Goals at FHFA. "ere are always a certain number of people who are one payment behind, or maybe two, but the number of loans that are three or more months delinquent is coming down. at is partly because of improvements in the economy in the last several years. Unemployment is going down and house prices are going up. House prices are actually a big one, because all other things equal, people will have life events, such as a divorce or a death in the family. When that happens and somebody has to sell their home, if they're above water and they have equity in their home, they can just sell the house and move on. If they're underwater, it becomes a problem and they can't sell the house." A decline in serious delinquencies for GSE-backed mortgage loans is concurrent with all the other declines in default-related metrics experienced by Fannie Mae and Freddie Mac in November. e GSEs completed 13,891 foreclosure prevention actions in November compared to 17,121 in October. Foreclosure prevention actions by the GSEs include loan modifications, repayment plans, forbearance plans, and charge-offs-in-lieu of foreclosure. e largest portion of those (8,569) were permanent loan modifications. Foreclosure prevention actions have been on the steady decline for the last four years, concurrent with the decline of foreclosure sales and foreclosure inventory. e totals of foreclosure prevention actions on GSE- backed mortgage loans for the last four years are as follows: 541,219 in 2012; 447,728 in 2013; 307,218 in 2014; and 215,309 in 2015 through the end of November. is number includes home forfeiture actions, such as deeds-in-lieu of foreclosure and short sales as well as home retention actions. "Fannie and Freddie over the last few years have really made more efficient their foreclosure prevention actions and the options provided to the borrower," Tagoe said. "One of the main lessons they learned from the crisis is that early intervention is key. e earlier they can get to that borrower and offer them a solution, the more likely it is that the borrower will become current. Fannie and Freddie released a streamlined loan modification a couple of years ago. What that does is as soon as a borrower goes 90 days delinquent, they are solicited by their servicer, and their servicer sends them the terms of a loan modification. All they have to do is send in that first payment and they're in a trial loan mod. When they make three payments, that's converted to a permanent loan modification. So once loans become 90 days delinquent, you're not seeing as many loans transitioning to later stages of delinquency." Another factor in the decline in serious delinquencies has been improved credit quality of the loans acquired by the GSEs since 2009 combined with a decline in the amount of serious delinquencies in the legacy portfolio, which consists of loans acquired before 2009, Tagoe said. e time it takes a loan to go into delinquency is also a factor—loans typically do not become delinquent until at least three years into the life of the loan. As of the end of 2015, the GSEs are only 10,000 and change away from completing three million home retention actions since the start of 2009; the exact total of home retention actions completed is 2,989,126; the number of foreclosure prevention actions since 2009, including home forfeiture actions, was 3,626,692 as of the end of November 2015. JUDGE TO BANK OF AMERICA: HOLD OFF PAYING INVESTORS IN RMBS SETTLEMENT A New York judge signed an order to delay payouts to investors from Bank of America Corp's $8.5 billion mortgage securities settlement because Bank of New York Mellon, the trustee in charge of the securities, was unsure how to split the proceeds among investors. Justice Saliann Scarpulla of New York State Court in Manhattan signed an order to hold payouts to a group of mortgage-bond investors including BlackRock, MetLife, and Pacific Investment Management in escrow. e decision to disperse the money had been made just one week prior to delay order and is intended to give investors the chance to voice their opinions on how the funds should be dispersed. According to the order, BNY Mellon petitioned the court to delay the payouts until it could untangle competing interpretations of the methodology. Payouts were scheduled at the end of January to begin on Feb. 10 and will eventually go to 530 residential mortgage- backed securities trusts. BNY Mellon's argument reportedly stems from a question of what each of the trusts should do with the money once received. e main question is whether the trusts should count the money it will receive from Bank of America as a decrease in the trust's liabilities to investors, or as an increase in the trust's assets. According to the filing, the order could lead to investors in less-secure investor classes receiving money that would otherwise be distributed to more senior investor classes. A group of 22 institutional investors negotiated the deal in June of 2011 to resolve claims that $174 billion worth of mortgage securities issued by the now-defunct Countrywide Financial Corp. (which Bank of America acquired in 2008) didn't meet their promised quality. e petition was accepted in New York Court last April. e payouts, when made, are expected to be a huge relief for Bank of America, which has had to contend with $50 billion in bad money, most of it due to what it took on from Countrywide, since the recession.

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