Friday, November 21, 2008

Its Freezing Time

Just in time for the freezing temperatures, Freddie Mac and Fannie Mae decided to get in the game. They have announced they will be freezing all foreclosures for 6 weeks. But like a frozen pond - it is may look safe but chances are likely you will still fall through. And you once you have fallen it is very difficult to get out safely.

Will this change anything? Perhaps spur a bit of holiday spending. Perhaps allow for a handful of people to get their financial lives back in order. But for most it looks like a 6-week postponement of the inevitable. Bloomberg News cover this story thoroughly in an article titled Fannie, Freddie Suspend Foreclosures Through Jan. 9. Lets take a look -

Fannie Mae and Freddie Mac, the mortgage-finance companies seized by the U.S. government, will suspend foreclosures and evictions over the holidays.

The six-week halt will begin Nov. 26, a day before the U.S. Thanksgiving holiday, and last through Jan. 9, the companies said in separate statements today. The hiatus is designed to give servicers more time to implement a streamlined loan modification program for struggling borrowers.

“It’s a giant time out,” Paul Miller, an analyst at FBR Capital Markets in Arlington, Virginia, said today in a Bloomberg Television interview. “I wouldn’t be surprised to see this across the board.”

Fannie and Freddie, government-sponsored enterprises that own or guarantee $5.2 trillion of the $12 trillion U.S. home mortgage market, were placed under federal control Sept. 6. They have since been pushed to work harder at modifying troubled single-family and multifamily mortgages to curtail foreclosures.

The companies plan to reduce interest rates for up to five years and lengthen repayment terms to as much as 40 years to trim monthly payments to roughly 38 percent of a homeowner’s monthly pretax salary. In some cases, borrowers may qualify to temporarily reduce the principal amount of the loan, which would be due without interest if the house is sold or refinanced.

“The Hope Now program is not going to be enough. It’s an incremental step,”
said housing advocate John Taylor, president and chief executive officer of the National Community Reinvestment Coalition in Washington. “Obviously, we’re pleased that they’re doing this, but absent a substantive foreclosure program, I wonder if this is this just another problem they’re leaving for the Obama administration.”

Hmm. How much of this is to just keep the numbers under 1 million foreclosures for the year as well as pushing off the problems. The January numbers are going to spike with the "time outs" back in the game as well as all the new people falling through the cracks. But then again it is also the same old same old. Pushing the problem down the road. Hoping that things will fix themselves before someone has to do something.

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