Mortgage Finance Companies to Suspend Evictions and Foreclosures for Holidays

Fannie and Freddie announced that they would suspend its eviction and foreclosure operations during holidays, from November 26, 2008 to January 9, 2009 to help homeowners avoid foreclosures.

Both mortgage finance companies said that the decision to suspend has been made to accommodate more people in their loan modification program.

Housing advocates and lawmakers have been pressuring Fannie and Freddie to intensify their efforts to combat foreclosures.

Fannie and Freddie announced that they would implement a mortgage-restructuring program to help borrowers who are three months behind on their mortgage payments but whose properties are not in some form of foreclosure proceedings.

Under the loan modification program, both companies will restructure loan terms to guarantee that a homeowner does not pay over 38 percent of his monthly pretax income on his mortgage.

The modification program will include extending loan terms for a maximum of 40 years, lowering interest rates and delaying loan payments. The suspension will extend the loan modification program to homeowners who have defaulted on their mortgage payments but whose properties are not in some form of foreclosure proceedings.

Fannie and Freddie estimated that about 16,000 homeowners could benefit from their loan modification program. The eviction and foreclosure suspension will cover occupied single-family houses.

Meanwhile, the program of Freddie Mac will cover residential buildings with up to four apartments.

James B. Lockhart III, director of the Federal Housing Finance Agency, said that the suspension will provide a chance to a delinquent homeowner to avoid foreclosure. At the same time, a homeowner will also be given an opportunity to work out loan terms to allow him to stay in his home.

David M. Moffett, chief executive officer at Freddie Mac, said that the company is helping three out of every five borrowers avoid foreclosure.

Fannie and Freddie’s loan modification program will start on December 15.