A Little Holiday Cheer
Additional Time Taken To Implement New Program
The initiative has come down from Fannie Mae and Freddie Mac to their network of servicers to halt all foreclosure and eviction proceedings between Nov. 26 2008 and Jan. 9, 2009, meant to give a recently announced rescue plan time to work.
The move is expected to give Fannie and Freddie additional time implement the new streamline modification recently announced and set to launch December 15th. The plan enables delinquent borrowers to get a modified mortgage that lowers payments to no more than 38% of their gross incomes.
"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 CEO David M. Moffett in a statement.
As a result, Freddie has told its servicers to immediately contact the 6,000 borrowers who already have auction sales or evictions scheduled for between the specified dates to tell them the sales are postponed. Fannie estimated that 10,000 of its borrowers will be affected. Borrowers facing eviction between Nov. 20 and Nov. 26 were not expected to get relief.
The foreclosure suspension affects only a small percentage of homeowners facing foreclosure over the next two months. Although Fannie and Freddie mortgages 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.
"The vast majority of what's going into foreclosure are not Fannie Freddie loans," said Freddie Mac spokesman Brad German.
The Fannie, Freddie plan was unveiled on Nov. 11. 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.
The mortgage rate could be lowered to as little as 3% for five years. After that, it would increase by 1 percentage point a year until it hits either the market rate or the original interest rate, whichever is lower.
Unlike previous federal efforts, participation by servicers is not voluntary. However, as mentioned in previous articles, this plan may not affect a great deal of at risk borrowers. We will continue to provide details of this plan and others as they roll out.
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