Fannie, Freddie Foreclosure Moratorium Extended

9 01 2009

The holiday season moratorium on foreclosures by Fannie Mae and Freddie Mac has been extended.

Those moratoriums, begun in November, were designed to give loan modification systems more time to work. Loan modifications include waived late fees, reductions in interest rate, lengthening of term, moving missed payments to the end of the loan, and rarely, reduction in principal.

Freddie Mac said 60 percent of its delinquent borrowers avoided foreclosure last year through workouts. Many borrowers who received workouts last year defaulted again within six months.

The two companies, which were seized by the federal government last year, have a mission of buying mortgages on the secondary market in order to provide liquidity, thereby lowering interest rates. They own or guarantee about half the mortgages in the country.

The moratorium was extended through the end of January, the companies announced today.

Fannie Mae also said it will start a new program designed to allow renters to stay in houses where the landlords stopped paying the mortgage. Details to come.

The moratorium does not apply to empty houses.

Although the earlier moratorium was expected to affect 16,000 households, the vast majority of foreclosures are not loans owned by Fannie and Freddie, because the companies did not permit the degree of risk-taking that the purely private subprime investors did.

Source: Jacksonville Business Journal

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