Fannie Mae and Freddie Mac recently announced that from November 26, 2008 to January 9, 2009, there will be a “stay of execution” for borrowers in jeopardy of foreclosure. In other words, they have provided an initiative to their servicer network requiring that all foreclosure and eviction proceedings shall be suspended during this time period, in order to provide a “reasonable opportunity” for the recently announced rescue program to be implemented effectively. The announcement affects approximately 6,000 borrowers who have auction sales or evictions scheduled over the holidays, who now have postponements effective until after the Christmas season.
This action is expected to give the federal housing giant adequate time to more efficiently implement their new streamlined modification that they plan to launch in mid December, 2008. Designed to enable borrowers delinquent on their mortgages who are able to qualify at a level of no more than 38% of gross income, the foreclosure suspension (unfortunately) assists only a small percentage of homeowners that are potentially facing foreclosure over the next two months. Homeowners facing eviction prior to November 26 are not expected to be offered any sort of relief, but an estimated 10,000 borrowers would qualify for the holiday “stay of foreclosure”, according to Fannie Mae personnel.
“By delaying these foreclosure sales, the nation’s servicers will have the opportunity to work with more borrowers who could qualify for a modification under the new program”, said Freddie Mac Chief Executive Officer David Moffett.
Eligibility is determined by several factors: Homeowners must be 90 days or more late in their mortgage payments, owe at least 90% of their home’s current value, live in the home on which the mortgage was taken and have not filed for bankruptcy. Although Fannie and Freddie mortgages predominately account for more than half of all mortgages, they have relatively few of the most risky subprime loans at the center of the foreclosure crisis, thus this program is only a small step in the road to recovery for the mortgage and housing debacle facing our country.
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With the Treasury Secretary on his spending spree he surely isn’t trying to get a good return on the tax payers’ investment. The bailout was to buy up bad mortgage debt but it never did. What is the purpose of the fund? Paulson’s has warrants on many banks and they average 1 – 3 percent when enacted. Yet the cash investment is about 20 percent of the market cap. Maybe the next Treasury Secretary will be less erratic.