With the holiday season imminent, two of the nation’s mortgage giants have announced initiatives designed to decrease the stress on homeowners facing foreclosure and provide a means by which they can restructure their mortgages to prevent the loss of their homes. In the face of a mortgage meltdown of unprecedented magnitude, Freddie Mac and Fannie Mae, the two giant lenders, have suspended all foreclosures of occupied homes from the day before Thanksgiving until January 9, 2009. The suspension comes after weeks of bad news for financial institutions and record breaking monthly job losses, combined with spiraling unemployment.
In making the announcement Fannie Mae indicated it was imposing the suspension to give borrowers an opportunity to keep their homes while the company worked with mortgage servicers to implement the streamlined modification program that is scheduled to go into effect December 15. The program is aimed at the highest risk borrowers, those who have missed three payments or more, owns and occupies the primary residence, and has not filed for bankruptcy. The goal of the program is to expedite assistance to these borrowers in the form of an affordable monthly payment by reducing the mortgage interest rate, extending the life of the loan or even deferring payments on part of the principal.
Fannie Mae President and CEO Herb Allison announced, “Until the streamlined modification program is fully implemented, we felt it was in the best interest of both borrowers and Fannie Mae to take this extra step to ensure that homeowners with the desire and ability to prevent a foreclosure have an opportunity to stay in their homes. 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."
The company will be working with foreclosure attorneys and servicers to reach out to the more than 10,000 borrowers Fannie Mae estimates would be affected during the blackout period. Borrowers will be contacted directly be the attorney handling the foreclosure. If the home is still occupied the company has instructed servicers and attorneys to suspend the foreclosure.
Freddie Mac is taking similar action, suspending foreclosure sales and evictions involving occupied single family and 2-4 unit properties. The company is moving to assist the estimated 6,000 borrowers with foreclosure sales scheduled for between November 26, 2008 and January 9, 2009. Also, no evictions will take place during this period. The temporary suspension will not apply to vacant single family properties.
“By working closely with 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 Freddie Mac Chief Executive Officer David M. Moffett. “Today’s announcement builds on this momentum and provides a new measure of certainty to many of these families during the holidays.”
The temporary suspension of foreclosure proceedings by Fannie Mae and Freddie Mac comes several months after many housing advocates and elected officials had called for an extended moratorium on foreclosures to give troubled homeowners an opportunity to secure their finances. At the annual Congressional Black Caucus Foundation Legislative Conference several participants in a National Town Hall Meeting on the mortgage crisis called for such action in the face of the tens of thousands of Black homeowners who were at risk of losing their homes.