(Source: The New York Times

EARLY last year, Fannie Mae began offering a surprising option for struggling homeowners: an unsecured personal loan of up to $15,000 to cover missed mortgage payments.

But vast numbers of borrowers who took out these loans ultimately defaulted. And though still in operation, that program, called HomeSaver Advance, is now being de-emphasized.

Fannie Mae’s initiative was intended to help those who had missed at least two mortgage payments because of a temporary setback like a job loss. Borrowers were eligible only if they had overcome that hardship, but had not yet caught up on their mortgages. The program’s loan carried a 5 percent interest rate and a 15-year term.

But the Federal Housing Finance Agency, which oversees Fannie Mae, the government-sponsored company, said that the program’s participants got into trouble quickly. Of the first 3,300 loans made from February through April of last year, the agency said, almost 70 percent went to borrowers who subsequently defaulted again on their first mortgages. The agency said that Fannie Mae made more than 91,000 loans, averaging $7,100 each, in the first year.

Read Bob Tedeschi’s full article “Avoiding Foreclosure” in the New York Times (May 29, 2009)/

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