Fannie Mae, Freddie Mac suspend some foreclosures

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New York, Nov 21: Fannie Mae and Freddie Mac, the two biggest US home loan finance companies, on Thursday said they would suspend foreclosures of occupied homes until early 2009, as the government moves to stem the tide of home losses plaguing the economy. Fannie Mae and Freddie Mac said the hiatus on foreclosures—- which will run from November 26 through January 9—will give mortgage servicers more to work out easier borrowing terms for troubled homeowners.

Regulators and lawmakers have leaned harder on the two companies to help stabilise the crumbling US housing market since they own or control about half of residential mortgages outstanding. The government effectively seized Fannie Mae and Freddie Mac in a conservatorship in September amid concern that steep mortgage losses were hurting their ability to remain viable and thus backstop the mortgage market.

“This is another news item that the government is hoping will stem the tide of foreclosures,” said Walter Schmidt, head of mortgage strategy at FTN Financial Capital Markets in Chicago. “But I don’t know it helps, it could put off the inevitable” because falling home prices give homeowners incentives to walk away, he said. The move by the two government-sponsored enterprises comes a week after their regulator unveiled a plan that could cut payments for hundreds of thousands of borrowers by easing terms on their loans. Homeowners facing foreclosure who are spending more than 38 percent of their income on mortgage payments could have payments reduced by the companies, under the programme.

Loan modifications by lenders have increased but so far failed to stop record increases in foreclosures.

The “streamlined modification” programme of Fannie Mae and Freddie Mac is slated to begin on December 15. Fannie Mae and Freddie Mac estimated their foreclosure suspensions may affect about 16,000 borrowers if the homes are occupied.