Fannie and Freddie give borrowers more time
The companies extend a moratorium on foreclosures hoping that more borrowers can solve mortgage payment woes.
NEW YORK (CNNMoney.com) -- Mortgage giants Fannie Mae and Freddie Mac have extended a moratorium on foreclosure suspensions for another three weeks, directing the mortgage servicers they work with to postpone any foreclosure or eviction proceedings through January 31.
Fannie (FNM, Fortune 500) and Freddie (FRE, Fortune 500) projected that, under the original moratorium, which began Nov. 26 and was scheduled to lapse on Jan. 9, 6,000 homeowners would avoid bank repossession and eventually qualify for mortgage modifications. The companies don't have any actual statistics tracking how many borrowers the moratorium has helped.
The extension should give servicers more time to help these at-risk homeowners enroll in the companies' Streamlined Modification Program.
That program is aimed at helping borrowers who are 90 days or more late on payments, who own and occupy their primary residences and who have not filed for bankruptcy to reduce mortgage payments to no more than 38% of their income. It was launched by Freddie and Fannie on December 15, 2008.
"Freddie Mac is committed to pursuing every responsible opportunity to reduce foreclosures and accelerate the return of stability to the U.S. housing market," said Freddie Mac CEO David Moffett in a prepared statement. "Today's announcement will provide Freddie Mac and its servicers additional opportunities to help put more families on the path to stable homeownership."
The foreclosure grace period applies to owners of single family homes as well as multiple family houses of two to four units that are occupied by renters. In addition to cutting the number of foreclosures, it could also help some families who rent apartments remain in their homes.
In the past, when building owners were foreclosed on their renters often faced immediate eviction, even when the renters were up to date with their payments.
In December, Fannie announced a new policy for renters called the National REO Rental Policy, which allows these renters to stay in their homes as long as they have legitimate leases and keep up with their rent payments.
The company said the additional three weeks of the moratorium will enable Fannie to put this new REO Rental policy more fully into operation.
It will also give Fannie more time to make sure all of its seriously delinquent borrowers who are eligible receive help from the company's "Second Look" initiative.
Under this program, which launched early last fall, Fannie Mae personnel work with servicers to make sure that all homeowners facing foreclosure have been contacted and told of the possible workout options available to them.