2006 Drop in Delinquencies Show Shifting Reasons Behind Single Family Late Payments, Says Freddie Mac

Job and Income Loss Fall As Reason for Delinquency, While Illness, Excess Debt Rise 


MCLEAN, Va., April 25  /PRNewswire/ -- A new analysis of 2006 mortgage delinquencies in Freddie Mac's portfolio of 10 million single-family prime loans reflects recent increases in payroll jobs, but also shows the impact of rising health care costs and personal debt on a growing number of borrowers. The analysis excludes delinquent loans in Louisiana and Mississippi due to the effects of the 2005 hurricanes.

At the end of 2006, only 0.53 percent of Freddie Mac-owned single-family loans were 90-days or more delinquent or in foreclosure, down from 0.69 percent at the end of 2005.  Freddie Mac's single-family delinquencies are still at 0.53 percent, according to the March monthly volume summary Freddie Mac also released today. Nationally, severe prime conventional loan delinquencies ended 2006 at 0.86 percent, according to data from the Mortgage Bankers Association.

Unemployment and income losses were linked to far fewer delinquencies on Freddie Mac-owned loans in 2006 than in prior years, the company said.  Job or income loss caused 36 percent of delinquencies in 2006 compared to 43 percent between 2001 and 2005.  But, delinquencies caused by excessive borrower financial obligations rose to 13.6 percent last year, versus 11.1 percent, while late payments linked to family or borrower illnesses rose from 19.2 percent to 21.1 percent.

"This analysis underscores the magnitude of difference between Freddie Mac's 0.53 severe delinquency rate and those in the subprime market," said Freddie Mac Chief Economist Frank Nothaft.  "The drop in job and income related delinquencies reflect the growth we've seen in payroll jobs, excluding the manufacturing sector, but the uptick in late payments due to excessive debt is potentially troubling because it is independent of economic trends and suggests some borrowers are having a harder time handling their financial obligations than in past years."

"Freddie Mac's very low delinquency rate is testimony to our risk management and efforts to inform borrowers about their workout options while giving broad authority and financial incentives to servicers to successfully help borrowers early in the delinquency cycle," said Ingrid Beckles, Vice President of Servicing and Asset Management at Freddie Mac. "By working together, Freddie Mac and its servicers are helping more than 40,000 delinquent borrowers a year get back on track and stay in their homes."

Freddie Mac requires mortgage servicers to explore several workout options with late-paying borrowers. These options include forbearance, which temporarily delays or reduces payments, repayment plans or loan modifications that can restructure the payment terms for a fixed period. Many servicers typically describe these options in their collection letters. However, it is up to borrowers to follow-up with their servicers to learn more about these options.  (For a description of workout options, see Avoiding Foreclosure at freddiemac.com.)

              CHIEF CAUSES OF MORTGAGE DELINQUENCY 2001-2006

      Cause                              2001-2005     2006*
  Unemployment or Loss of Income           42.8%       36.3%
  Illness in the Family                    19.2%       21.1%
  Excessive Obligation                     11.1%       13.6%
  Marital Difficulties                      7.9%        6.0%
  Death in the Family                       3.7%        3.9%
  Property Problems or Casualty Loss        1.7%        2.8%
  Extreme Hardship                          2.8%        0.9%
  Inability To Sell Or Rent Property        1.3%        1.4%
  Employment transfer or military service   0.9%        0.6%
  All other reasons                         8.7%       13.3%



*Excludes delinquent loans in Louisiana and Mississippi due to the effects of the 2005 hurricanes.

Source: Freddie Mac

Freddie Mac is a stockholder-owned corporation established by Congress in 1970 to support home-ownership and rental housing. Freddie Mac purchases single-family and multifamily residential mortgages and mortgage-related securities, which it finances primarily by issuing mortgage pass through securities and debt instruments in the capital markets.  Over the years, Freddie Mac has made home possible more than 50 million times, ensuring financing for one in six homebuyers and more than four million renters.  For more information about Freddie Mac, visit: http://www.freddiemac.com/. 

DATASOURCE: Freddie Mac



CONTACT:  Brad German of Freddie Mac, [phone]



Web site:  http://www.freddiemac.com/ 

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