Fannie Mae to Suspend Foreclosures in Drastic Measure

Reuters announced today that lending giants Fannie Mae and Freddie Mac are suspending foreclosures! The story goes on to state that “Fannie Mae is also planning to expand rental options after default and a new “rent-to-own mortgage program,” said spokesman Brian Faith.
It also states that 16% of ALL mortgages will be foreclosed if there is not government intervention.
Fannie and Freddie report that they will seek loan modifications to help borrowers retain ownership.

By Al Yoon and Patrick Rucker
NEW YORK/WASHINGTON (Reuters) - Under plans announced on Friday, the two largest U.S. housing finance companies expect to help tens of thousands of homeowners and renters stay in their properties even after the underlying mortgages have gone into default.
Since Fannie Mae and Freddie Mac were nationalized in September, the government-controlled companies have been retooled as housing-aid agencies. Both put a moratorium on foreclosures late last year and both are pioneering programs to let borrowers rent their homes after default.
Over the last two years of a housing downturn, many renters in good standing have been forced out because their landlord went into default.
"This is going to soften the impact of evictions on all occupants, particularly renters who had no idea that their home was going into foreclosure," said Brad German, a Freddie Mac spokesman.
Through mid-January, Fannie suspended about 20,000 foreclosures and 6300 evictions by owners or renters, the company said.
Fannie Mae is also planning to expand rental options after default and a new "rent-to-own mortgage program," said spokesman Brian Faith.
An early proponent of giving foreclosed homeowners the right to rent their property was Dean Baker, co-director of the Center for Economic and Policy Research.
"I came to this idea as a way to give help without spending a huge amount of taxpayer money and it does not create a motivation for a borrower to default," said Baker.
Both companies have extended their suspensions of evictions of borrowers or renters due to foreclosure through February 28.
The programs are meant to ease the pressure of a deep housing market downturn and record defaults. As vacancies rise, home values in a neighborhood typically decline.
When home prices fall, foreclosures follow as stressed borrowers find themselves owing more than the house is worth and unable to obtain financing.
Credit Suisse in December estimated that 8.1 million, or 16 percent of all mortgages, would be in foreclosure over the next four years without more lender or government interventions.
"Keeping foreclosed properties occupied and in better repair will support local property values and promote a faster recovery in the housing market," David Moffett, Freddie Mac's chief executive officer, said in a statement.
Freddie Mac will still seek loan modifications to allow borrowers to retain ownership, it said.
Eligible renters will be offered month-to-month leases, the companies said.
(Editing by Dan Grebler)