Fannie Mae, Freddie Mac suspend foreclosure sales
Restriction is in place from Nov. 26 to Jan. 9
By Ronald D. Orol, MarketWatch
"Freddie Mac is on track to help three out of every five troubled borrowers with Freddie Mac-owned loans avoid foreclosure this year," Freddie Mac Chief Executive David Moffett said in a statement. "Today's announcement builds on this momentum and provides a new measure of certainty to many of these families during the holidays."
The government-controlled mortgage companies said they are ordering a national network of mortgage servicers and foreclosure attorneys to prohibit the sale of foreclosed homes for single-family and two- to four-unit properties with mortgages owned by the two entities.
Freddie Mac's Moffett added he expects that lenders servicing Freddie Mac-owned mortgages will work with borrowers to help people stay in their homes. Freddie Mac plans to approve settlements for mortgage payments with roughly 84,000 homeowners; however, 140,000 mortgages are delinquent on Freddie Mac-owned mortgages.
The suspension of foreclosure sales was motivated, in part, by a desire by Freddie Mac to allow mortgage-service firms to take additional time to work with borrowers as part of its Streamlined Modification mortgage program, scheduled to launch on Dec. 15. The loan-modification plan helps homeowners who haven't been able to make their payments for the previous three months.
James Lockhart, the director of the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac said in a statement that the suspension will give "delinquent borrowers ... an opportunity to avoid foreclosure and work out terms."
The Fannie Mae and Freddie Mac action comes as the stock market sank Thursday on news that Congress didn't reach a deal on a bailout for the automotive sector, as well as a number of negative indicators. The Dow Jones industrial average fell 445 points, or 5.6% while the Standard & Poor's 500 index fell to 776.76, or 6.7%.
On Thursday, first-time filings for unemployment benefits rose to the greatest level since July 1992, shooting up to 27,000 to a seasonally adjusted 542,000, and the index of leading economic indicators fell 0.8% in October, showing the economy is very weak and getting weaker.
Ronald D. Orol is a MarketWatch reporter, based in Washington.
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