Fannie Mae and Freddie Mac recently announced they will postpone foreclosure sales and evictions on occupied single-family residences scheduled to occur between November 26, 2008 and January 9, 2009.
During this time, the companies will streamline their mortgage modification programs, scheduled to launch December 15. Foreclosure attorneys and loan servicers will continue to contact borrowers who have defaulted on their mortgage loans owned or guaranteed by Fannie Mae or Freddie Mac, and continue to pursue workout options.
Note: this is a holiday halt only. Companies are attempting to contact homeowners and trying to arrange loan modifications for those who qualify.
The companies said they would enact a program to restructure mortgages for borrowers who are falling behind in their payments. That effort would seek to help homeowners who haven’t paid their loans for three months but whose homes had not been foreclosed upon yet. In a foreclosure, Fannie Mae or Freddie Mac seizes control of a home and, usually, tries to sell it.
This program extends aid to those who are in immediate danger of foreclosure. The companies estimate that means about 16,000 homes.
Under the mortgage modifications program unveiled last week, Fannie and Freddie will seek to modify loan terms to ensure borrowers aren’t paying more than 38 percent of their monthly pretax salary on their mortgage. The companies will do this by extending the total term of loans to up to 40 years, reducing the interest rate, and, in some cases, delaying payment on part of the loan.
Notice, though, that lenders do not want to reduce loan balances even for borrowers who are seriously upside down on their home’s value as is the case for almost anyone in California who bought or refinanced between 2003 and 2007.