Fannie Mae has doubled the number of what it calls "loan modifications" and "repayment plans" for seriously defaulting homeowners during the last two years, up from 7,600 in 1997 to an estimated 16,000 this year. More significantly, the percentage of troubled borrowers receiving customized attention has jumped. In 1997, 22,000 of the 34,000 Fannie Mae borrowers who were seriously in arrears - typically four or more months behind on payments - ended up going to foreclosure. This year, fewer than half - 14,500 out of 33,000 seriously defaulting borrowers - are expected to go to foreclosure.
At Freddie Mac, the shift in approach is comparable: Customized workouts and repayment plans have increased from 20 percent to 50 percent of all troubled loans, effectively cutting the number of borrowers forced into foreclosure by almost half.
Other major players in the home mortgage industry are following suit. Lenders increasingly are eager to listen to borrowers' problems and to attempt to work things out with repayment arrangements the borrowers can afford, or even by lowering the interest rate on the mortgage note.
Both Fannie Mae and Freddie Mac have teams of specialists and counselors who attempt to tailor solutions for people like Jack and Jean by looking in detail at their entire financial picture.
Outreach like this comes with the help of some high technology behind the scenes. Both Freddie Mac and Fannie Mae use sophisticated electronic behavioral models plugged into credit bureau data files to spot people who can benefit from early intervention. Phil Comeau, Freddie Mac's vice president for nonperforming loans, estimates that "the probability of helping a borrower save his home decreases by 50 percent with every 30 days" after the borrower has fallen two months behind on the mortgage.
