Extremely high redefaults are forcing Fannie Mae to scale back its HomeSaver Advance program, which uses small personal loans to enable delinquent homeowners to catch up on their mortgage payments.

A Federal Housing Finance Agency (FHFA) report shows 70% of borrowers redefaulted on their first mortgages in the first 3,300 advance transactions Fannie servicers completed in early 2008. "Fannie Mae is deemphasizing HomeSaver Advance and focusing attention on the Making Home Affordable modification program," an FHFA spokesperson said. Fannie Mae launched the advance program in February 2008 as a loss mitigation tool aimed at allowing the government-sponsored enterprise to avoid the cost of purchasing nonperforming mortgages out of securitized pools.

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