Fannie Mae and Freddie Mac took another step toward addressing the foreclosure crisis affecting millions of American homeowners and announced it would halt such proceedings until January 2009 on homes purchased with loans owned by or guaranteed by the two firms.
The announcement will immediately affect approximately 16,000 borrowers whose homes have been scheduled for a foreclosure sale between Nov. 26, 2008, and Jan. 9, 2009. If the home is occupied, Fannie and Freddie’s servicers and foreclosure attorneys have been told to stop the sale; the firms also said it would not evict homeowners during that same period. (The temporary stay will not apply to vacant single-family homes.)
“By working closely with [the Federal Housing Finance Agency (FHFA)] and our servicers, Freddie Mac is on track to help three out of every five troubled borrowers with Freddie Mac-owned loans avoid foreclosure this year,” said David M. Moffett, Freddie Mac’s CEO. “Today’s announcement builds on this momentum and provides a new measure of certainty to many of these families during the holidays.”
The idea is to give borrowers time to enroll in Fannie and Freddie’s new streamlined loan modification program, which was unveiled last week. “Today’s announcement has the potential to enable more families struggling in these extraordinary times to take advantage of this vital new initiative developed with FHFA, the Treasury Department, and the mortgage finance industry,” said Moffett.
The loan modification program, which begins Dec. 15, promises to make mortgage payments more affordable for financially strapped households by adjusting rates, mortgage types (fixed versus adjustable rate), and loan length. Fannie Mae leadership even said today in a statement that their servicers “are prepared to work with borrowers during this period, even if previous workout efforts have been unsuccessful. As part of the company's ‘Second Look’ initiative, Fannie Mae personnel have been reviewing seriously delinquent loans to determine if the borrower has been contacted and all workout options have been exhausted.”
The caveat? Both this temporary foreclosure moratorium and the previously announced mortgage modification program only applies to home loans owned or guaranteed by Fannie or Freddie, but many hope others in the mortgage industry will follow the lead of these two firms. “We encourage other servicers of non-GSE mortgages to participate in the streamlined modification program to bolster our collective efforts to stem the foreclosure crisis,” said Herb Allison, president and CEO of Fannie Mae.
Alison Rice is senior editor, online, at BUILDER magazine.