SAN DIEGO - Freddie Mac, a dominant provider of housing finance money, sees tough times ahead for the U.S. residential market, even as government programs seek to soften the foreclosure crisis, two top Freddie executives told Reuters.

With inconclusive evidence of a housing rebound over the summer, Freddie Mac must redouble its efforts on the government programs that make modified or refinanced loans more affordable, Charles E. Haldeman, the chief executive, said in an interview late Monday at a Mortgage Bankers Association meeting here.

The company's long-developed models aren't signaling that the housing crisis is over, Haldeman said. With rising unemployment and the process of modifying loans unexpectedly arduous, seeds of hope from the latest data haven't altered Freddie Mac's outlook, he said.

We ought to keep the pressure on to focus on doing all that we can in terms of modifications and refinancings to help the consumer, and not take much solace in the fact that maybe housing prices are bottoming out and stabilizing, he said.

Freddie Mac came under the control of a federal regulator after falling home prices and rising defaults led to the worst housing crisis since the 1930s. Freddie lost billions of dollars on loan guarantees and securities in its portfolio.

The company's current portfolio of both guaranteed loans and investments totals about $2.3 trillion.

In August, the company said provisions for credit losses declined in the second quarter, but would increase again.

The U.S. Home Affordable Modification Program (HAMP) is a key effort to ease the crisis, but Freddie and its mortgage servicing companies have a lot of hard work ahead, said Haldeman and Don Bisenius, an executive vice president of its single-family mortgage credit business.

HAMP is being slowed down by the process requiring homeowners to collect various documents, the executives said. Most mortgage servicers are temporarily modifying requirements under verbal agreements.

More than one-half million troubled homeowners are in trial HAMP modifications, Treasury Secretary Timothy Geithner said last week, and the number of trials is rapidly growing.

But economists said the true test will be how many trial modifications become permanent and how many borrowers default on their new loan arrangements.

What has surprised us is the numbers that have made three, four, or even five payments, but still haven't gone to close because the final documents aren't in place, Bisenius said. It is too soon to know how many trials are failing, he added.

The volume of completed trial modifications is not as high as we'd hoped because of documentation, said Douglas Potolsky, a senior vice president of capital markets at Chase Home Lending, at the Mortgage Bankers Association conference.

There's a ton of work left to do, said Eric Schuppenhauer, a Fannie Mae senior vice president who was also at the conference.

Freddie Mac and its mortgage servicers are doing more hand-holding with homeowners than lenders typically do for new loans, Haldeman said.

Freddie Mac hired a company in September to meet in-person with delinquent borrowers at their homes and help them complete paperwork needed for the HAMP. It increased its own staff that deals with such programs by 70 percent, Haldeman said.

The Treasury is streamlining the process for servicers by eliminating the need for signed tax returns and allowing more discretion on what is needed for approval, Laurie Anne Maggiano, policy director for the U.S. Treasury's Office of Homeownership Preservation, told the same San Diego panel.

Still, Freddie officials are wary of the most recent data, such as recent home price gains. They point to the growing inventory of homes from foreclosure hitting the market, Freddie executive Bisenius said.

The number of Freddie-owned foreclosed properties is also rising, even as sales continue apace, Bisenius said.

Sales from Freddie's inventory are running at about 6,000 to 6,500 a month, as the company is taking on 7,000 to 7,500 foreclosed properties in the same periods, he said.

Despite all the efforts, there will be a fairly large impact of ongoing conversions of foreclosed properties hitting the marketplace, Bisenius said. That's going to increase supply and put a damp on other price appreciation.

Having said that ... what happens with unemployment will drive it, he said, regarding the fate of housing.

(Editing by Jeffrey Benkoe)

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