Fannie Mae and Freddie Mac to Suspend Foreclosures

Posted in Foreclosures, September 22nd, 2008 |

Mortgage giants Fannie Mae and Freddie Mac were asked to suspend foreclosure filings on mortgage loans by four democrat senators in the US. The Federal regulator and the newly appointed Chief Executive who have taken over the administration of the mortgage companies had instructed them to hold foreclosure proceedings temporarily in abeyance. Fannie and Freddie were instead advised to provide more affordable loans in lieu of their prior mortgage loans to the struggling borrowers in order to annul the foreclosure cloud looming large over them, especially the low-and middle income-group borrowers. The government insisted that the distressed borrowers remain in possession of their property availing of the more affordable loans in these times of crisis.

The Congress was mounting pressure on James Lockhart, Director of the Federal Housing Finance Agency, to use his resources in order to assist house owners caught in the foreclosure mesh. The senators, Menendez of New Jersey, Schumer and Brown of Ohio and Casey of Pennsylvania felt that the giant mortgage companies should implement whatever steps necessary to stop additions to the foreclosure list and subject them to “suffer the economic and personal disaster of foreclosure.” Fannie Mae and Freddie Mac had approximately $5 trillion in outstanding mortgages, which constituted more than half the country’s total. The ‘freeze in foreclosure’ that the lawmakers had urged the companies for, were to last for at least 90 days, and would not be applied to all the loans mentioned.

The Federal Government had seized control over the housing mortgage companies is a fervent bid to restore the housing market and the financial crisis that had engulfed the country and failed to show any signs of recovery for the past two years. Chief Executives of both the companies had been ousted and replaced and Mr. Lockhart had been advised to follow the example of Sheila Bair, Head of Federal Deposit Insurance Corporation although the conservative policy might add the burden on the taxpayers.
Bair‘s line of work was to urge banks to modify their lending policies and develop a comprehensive plan, which would offer a dignified solution to defaulting borrowers. The FDIC had first temporarily frozen house foreclosure, and went on to allow seriously distressed borrowers to swap loans at affordable rates. Fannie Mae and Freddie Mac were expected to work on the same lines. Mr. Frank, the Chairman of the Senate Banking, Housing and Urban Affairs Committee was to examine how the foreclosure prevention law was working.