WASHINGTON - Mortgage giants Fannie Mae and Freddie Mac will suspend foreclosure sales and evictions on up to 16,000 properties until after the holiday season, as it prepares to implement its previously announced loan-modification program.
Fannie and Freddie, which are under government control, last week said they would begin to modify the loan terms on potentially hundreds of thousands of mortgages that are at least 90 days past due.
The voluntary plan would enable certain borrowers to receive more affordable loans that would make their mortgage payments at most 38% of their monthly income. Although Fannie and Freddie, known as government sponsored enterprises (GSEs), hold a relatively small percentage of all the troubled mortgages, government officials hope their moves will be adapted by other mortgage holders, lenders and mortgage-servicing companies.
"We encourage other servicers of non-GSE mortgages to participate in the streamlined modification program to bolster our collective efforts to stem the foreclosure crisis," Fannie Mae President and Chief Executive Herb Allison said in a statement.
Until recently, the mortgage industry's position was that troubled loans must be handled one by one, a costly and time-consuming process. But as home prices continue to plummet, the cost of foreclosure is climbing.
Freddie is trying to find buyers for a rapidly growing number of foreclosed homes, totaling 28,089 at the end of the latest quarter, up from 11,916 a year earlier. Gross proceeds from the sale of foreclosed homes on average were 29% less than the unpaid loan balance in the third quarter, compared with 14% a year earlier. That doesn't take into account related costs, such as repairs and commissions to real-estate agents, and it excludes possible recoveries from mortgage insurance.