From the WSJ:
Two years after they were taken over by the federal government, Fannie Mae and Freddie Mac face a new challenge: The mortgage-finance giants are becoming two of the nation’s largest home sellers at a time when the housing market shows new signs of softening.
Fannie and Freddie have already taken back nearly as many homes in the first half of the year as they did all of last year. They owned more than 191,000 homes at the end of June, double the year-earlier total. That number will grow because they are taking back homes faster than they sell them.
In recent weeks, Fannie Mae has warned that it could get tougher on lenders that are taking too long to reclaim homes once they have determined that the home is vacant or once they have exhausted foreclosure alternatives, such as modifications. Mortgage servicers, which collect fees from Fannie, could face fines if the process is unreasonably prolonged.
Fannie’s recent reminder to banks signals a growing impatience with delays that have become “exaggerated and unmanageable,” says Edward Delgado, a former Wells Fargo & Co. executive who is now chief executive of the Five Star Institute, a provider of training programs for mortgage professionals.
Already, as borrowers fail to qualify for permanent modifications, newly initiated foreclosures at Fannie and Freddie have risen for three consecutive months to more than 150,000 in July, up nearly 60% from April, according to LPS Applied Analytics.
That creates an increasingly delicate balancing act. The costs of managing those homes are adding up, but the companies are reluctant to slash prices and dump lots of homes at big discounts.
Banks are also entering a less favorable environment for disposing of rising inventories. While mortgage rates continue to fall to record lows, home-buying activity stalled earlier this year when tax credits to spur sales expired.
“One year ago, you couldn’t even keep them on the market,” says Brett Barry, a real-estate agent who sells foreclosed homes for Fannie Mae in Phoenix. “That’s so done.”