A senior Treasury Department official said this week that government-sponsored entities (GSE) Fannie Mae and Freddie Mac are not doing enough to decrease their portfolio of nonperforming mortgages, and that the two companies need additional help from specialists.
Under Secretary for Domestic Finance Mary Miller made the remarks Tuesday at the Governor’s Housing Conference in Baltimore.
“We are also working with [the Federal Housing Finance Agency] to explore better ways to manage the resolution and disposition of the GSEs’ book of non-performing loans,” said Miller in prepared remarks. “Shifting the risk and servicing responsibility to special servicers, who have expertise in loan workouts, could give such servicers more flexibility to determine modifications or find faster resolutions for troubled borrowers.”
Both Fannie and Freddie have already sought outside help for their worst loans, hiring specialty servicers to handle the mortgages. But Miller said that the feds are looking to do more to get the loans off of the GSEs balance sheets.
“Several states, using Treasury’s Hardest Hit Fund, are experimenting with purchasing non-performing loan purchases from private lenders,” said Miller. “So far, there is a great deal of interest in this innovative approach, and we hope for positive outcomes for individual borrowers as well as for local housing markets that should see fewer properties going into foreclosure.”
The mortgage lending market has long waited for a definitive program for lenders to sell non-performing mortgages after the focus of the Troubled Asset Relief Program (TARP) in late 2008 shifted from loan purchasing to liquidity boosting.