Americans continue to have a love/hate relationship with mortgage giant, Freddie Mac. Currently the feeling is leaning towards the loathing side as the 2009 second quarter statistics have indicated that approximately half of all the mortgage modifications processed by the government-assisted lender have re-defaulted.

Freddie Mac processed approximately 16,000 modifications as part of the Home Affordable Modification Program (HAMP). HAMP is one of the programs that was part of the Financial Stability Act of 2009 and was developed to help "qualified home owners refinance or modify their existing loans as a way to stem foreclosure epidemics", (MortgageMarvel.com). According to the third quarter financial supplement released by Freddie, 42 percent of the modified mortgages became delinquent approximately a year after the mortgage terms had taken affect.

The program first launched in March of 2009 and financial experts accept this as proof that the strategy is not up to par and is doing very little to counterbalance the effect of nonperforming assets that are part of Freddie's portfolio.

History of Freddie Mac

Despite the wholesome sounding name Freddie Mac is an acronym for the a government funded mortgage issuer known as the "Federal Home Loan Mortgage Corporation." Freddie is considered to be the younger brother of Fannie Mae, which is the elder branch of the government agencies. Fannie was created back in 1938 by President Roosevelt and Congress, as a way to help aid the economy reeling from the Great Depression. Fannie was charged with buying up toxic mortgages, freeing the assets of the banks to get back into the business of issuing loans. It was that program that helped convert the country from a nation of renters, into one of homeowners, as the agency has been cited with making low rate mortgages with lengthy terms a reality.

Because of the overwhelming success of Fannie Mae, President Lyndon Johnson created Freddie Mac as a way to prevent a monopoly from forming and to get the bad debt off of Fannie's balance sheets. Freddie Mac was created in 1970 and went public in 1989. Once Freddie went public, the organization was sited with the responsibility of generating profits for shareholders. It was that need that forced the lender to compete with the private mortgage industry and get actively involved in the subprime mortgage industry. When that industry started to crash, Freddie started to as well.

Latest Freddie Mac Fail

Freddie Mac has reported that the current wave or mortgage defaults represent monthly payments in the 90-plus day delinquency range, foreclosure or real estate owned (REO) property. During the 2009's third quarter the mortgage giant reported losses in the $2.5 billion range. Because of the losses combined with the need of Freddie Mac to function, the government-assisted agency requested an additional $1.8 billion in government assistance. This amount is in addition to the $63.1 billion previously funneled to the agency at the beginning of the mortgage meltdown.

The latest Freddie Mac fail was not completely unexpected. In October of 2010 The Congressional Oversight Panel stated an expectation that half of all HAMP modifications would eventually enter re-default status. The Treasury believes standardization of process (not helping homeowners keep their houses) is the biggest contribution of the HAMP program.

Opt for Private Programs

Combined with the complexity and trial and error approach that was utilized through most of the HAMP program, consumers looking for mortgage modifications may be better off speaking with their lender directly and working out a deal. The reality is that consumers favored private lender loan modifications four to one over the HAMP option (September).

Consumers looking to rework the terms of their current loans should begin the process by contacting their original lender. Qualified consumers may be able to catch a break from their mortgage issuer in the form of mortgage forbearance or a refinance opportunity. If a lender will not budge, individuals are advised to see if they can find a new mortgage, as mortgage rates are at historic lows and refinancing can help consumers shave hundreds and even thousands of dollars off of their total loan expenses.