Fannie Mae Teams Up With Law Firms To Tackle Foreclosures

March 28th, 2008 | Tags: Foreclosure

Fannie Mae, the largest mortgage finance firm in US has taken a more proactive stand to tackle the foreclosure problem. It is appointing various law firms to work out repayment terms. Hitherto these law firms like Phelan, Hallinanan & Schmieg LLP would, when approached by borrowers, link them to the mortgage servicers. But now, under the prodding of Fannie Mae, these law firms are working out repayment plans directly. The plan is expanding. Fannie Mae is making the process more easy by removing one layer in the hierarchy.

As the foreclosure wave swells and surges the government and the mortgage industry are desperate for remedies. The lenders are weighed down with millions of houses and government tax kitties are going empty while the real estate market plunges. Neighbourhoods are becoming dangerous with empty abandoned houses creating health hazards and attracting crime. It is a vicious circle with property prices falling and mortgage being not available for potential buyers. The result is there are more houses than purchasers.

Fannie Mae had sanctioned mortgages mostly to those with good credit. The numbers defaulting during the last three months jumped from 0.66% in the end of 2006 to 0.98% in the end of 2007. Advocates representing the poor were all praise for the endeavours of Fannie Mae. However Patricia Hasson, spokesperson for a non-profit consumer credit counseling service of Delaware Valley warns the law firms working on behalf of Fannie Mae is that they must first see to the interests of the borrowers. The law firms like Phelan Hallinan Schmieg are paid $200 for every completed repayment plan by Fannie Mae. Phelan insists that fees are not important to them when the issue is that of saving homes of people.

In 2007 in Pennsylvania 25% of the foreclosure posting ended in a court auction. 15% to 25% range is though to be record making.

Fannie Mae was encouraged when they found that more and more borrowers were turning to these law firms for help. Usually 40% to 50% of the borrowers do not contact the lenders. Fannie Mae wants the numbers to be reduced. There are 39 law firms across 15 states working under the aegis of Fannie Mae making out repayment or forbearance plans. Recently Pennsylvania has been included. Payments worth $50,000 are being sent out to the law firms for handling foreclosure related problems successfully.