Mortgage Companies Planning To Halt Foreclosures
The mortgage companies Fannie Mae, Freddie Mac and Citigroup Inc. are planning to halt foreclosures by cutting down on house loan payments. This will benefit thousands of troubled borrowers. Similar moves are being mulled over by other jumbo banks.
Fannie Mae and Freddie Mac will be cutting down both on the principal and interest of some loans. The terms of some others will be extended according to Federal Housing Finance Agency. The latter took over the controls of Fannie Mae and Freddie Mac last September.
The mortgage servicing companies are being pressurized by the Congress to work with the borrowers. The third quarter reports on foreclosures were alarming. Last month Morgan Chase said that it would put on hold foreclosures on few loans while it sorted out the problem of how to make payments easier of mortgages worth $110 billion that were troubling borrowers. Bank of America claimed that it had modified 226,000 loans in this current year.
Joel Naroff of Naroff Economic Advisors Inc. of Holland, Pennsylvania said, “If housing doesn’t get stabilized, it’s really going to continue to bleed the economy.” Naroff has been one of the most accurate forecasters.
Another jumbo bank, Citigroup, will reach out in the next six months to nearly 500,000 house owners having trouble with mortgages worth $20 billion. Citigroup claimed that they had assisted nearly 370,000 foreclosure victims struggling with mortgages worth $35 billion from 2007. The main aim of the bank is to see that people stay in their houses. For six consecutive quarters Citigroup has suffered losses on mortgage holdings. It has modified over 120,000 loans. This includes granting of extension to some in the first six months of 2008. Citigroup is concentrating mainly on borrowers from areas that are “likely to face extreme economic distress.” Citigroup will be targeting those owners who live in their mortgaged houses and have the income to run the new modified mortgages. Those who fulfill these conditions will be allowed a grace period from foreclosures.
The stocks of all three – Fannie Mae, Freddie Mac and Citigroup had fallen sharply in the New York Stock Exchange. According to RealtyTrac there were 765,558 foreclosures this third quarter of 2008 – the highest since 2005. Real estate prices tumbled by 20% in 20 metropolitan areas. The price of previously occupied houses in August was 32% less than the peak it had reached in September 2005.
