Holiday From Foreclosures Till January 2009

December 1st, 2008 | Tags: Foreclosures

Nationalized mortgage giants Fannie Mae and Freddie Mac are offering holidays from foreclosures till 2009. This will temporarily bring some relief to besieged house mortgage borrowers. Banks have realized that accepting lower payments is a better alternative to proceeding with foreclosure.

Fannie Mae and Freddie Mac jointly announced that they would suspend foreclosure operations from 26th November – eve of Thanksgiving Day. It will end on 9th January 2009. This will give time to the mortgage servicers and finance firms to work out a more streamlined course of action to modify loans so as to avoid foreclosures. The new plan will be announced on 15th December. It will target those at high risk from foreclosures – that is those who have missed three or more running payments and live in the mortgaged house without having filed bankruptcy. For this category of borrowers the interest would be reduced and the maturity period extended. In some cases the payment of the principal would be deferred.

Herb Allison of Fannie Mae said, “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.” He also added, “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 two companies are optimistic that by this move about 16,000 borrowers will benefit.

Fannie Mae and Freddie Mac, both are sponsored by the government. They were placed under Federal Housing Finance Agency from 6th September 2008 when on the verge of collapse. Immediately after being taken over, the Congress asked them to slice their foreclosure proceedings by half. The duo makes up the most important part of the mortgage world by owning nearly half the mortgage of the nation amounting to $12 trillion. It was largely responsible for the foreclosure mess by purchasing securitized loans.

Prior to this announcement by Fannie Mae and Freddie Mac the important banks in America took the lead in announcing temporary halt on foreclosure operations. It was responding to repeated calls by the Congress to help the foreclosure victims to modify their soured loans. The banks have realized that something is better than nothing. Their loss would be greater if they followed the foreclosure route.