Fannie, Freddie to suspend foreclosures amid holidays

Mortgage finance companies Fannie Mae and Freddie Mac are suspending foreclosures for about 16,000 households during the holiday season.

The two companies said Thursday that they would halt foreclosure sales between Wednesday and Jan. 9 while they evaluate whether borrowers qualify for a new loan modification program announced last week.

Fannie Mae said about 10,000 households would be affected and Freddie Mac said the changes would affect about 6,000 borrowers facing foreclosure. The change does not apply to vacant homes.

The announcement “provides a new measure of certainty to many of these families during the holidays,” Freddie Mac Chief Executive David M. Moffett said in a news release.

Both Fannie and Freddie were seized by the government on Sept. 7. Their former CEOs were ousted and the government now has direct control.

Fannie and Freddie’s loan modification plan aims to help homeowners who have fallen at least three months behind on their payments, but only if their loans are held by the two companies.

Under the program, the new primary mortgage payments -- including taxes and insurance -- shouldn’t total more than 38% of homeowners’ monthly pretax income.

Fannie and Freddie are the dominant players in the U.S. mortgage market but hold only 20% of delinquent loans. Ultimately about 400,000 households are likely to qualify for the loan modification program, said Priya Misra, a mortgage analyst with Barclays Capital.

By contrast, the Federal Deposit Insurance Corp. estimates that more than 4.4 million borrowers will become delinquent by the end of next year, not including loans backed by Fannie and Freddie.