Fannie and Freddie get in the holiday spirit
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Taking a cue from Obama’s campaign, Fannie and Freddie are freezing foreclosures, although not for 90 days. From the Associated Press via MSNBC.com:
Mortgage finance companies Fannie Mae and Freddie Mac are suspending foreclosures for about 16,000 U.S. households during the holiday season. The two companies said Thursday that they will halt foreclosure sales between Nov. 26 and Jan. 9, while they evaluate whether borrowers qualify for a new loan modification program announced last week.
Adds CNNMoney.com:
‘By delaying these foreclosure sales, the nation’s servicers will have the opportunity to work with more borrowers who could qualify for a modification under the new [program],’ said Freddie Mac CEO David M. Moffett in a statement. Freddie has told its servicers to immediately contact the 6,000 borrowers who already have auction sales or evictions scheduled for between the specified dates to tell them the sales are postponed. Fannie estimated that 10,000 of its borrowers will be affected. Borrowers facing eviction between Nov. 20 and Nov. 26 were not expected to get relief.... The mortgage rate could be lowered to as little as 3% for five years. After that, it would increase by 1 percentage point a year until it hits either the market rate or the original interest rate, whichever is lower.
In a departure from previous federal plans, this does not rely on the voluntary participation of banks. They must comply. But is this just forestalling the inevitable? And what will it cost the taxpayers?
It looks like a drop in the bucket. More than 4.4 million borrowers could become delinquent by the end of 2009, the Federal Deposit Insurance Corp. estimates.
-- Lauren Beale
