Fannie Mae & Freddie Mac Temporarily Suspend Foreclosures

Last Thursday the twin mortgage giants Fannie Mae and Freddie Mac announced they were suspending all foreclosure sales and pending evictions beginning on November 26th through January 9th 2008.  Shortly after the announcment I started receiving calls from associates and clients asking me what affect I thought this would have locally on foreclosures.  My answer was not much at all.  Even though Fannie Mae and Freddie Mac own neary half of all loans originated in the U.S., the number of loans in their portfolio that are in foreclosure is actually very small.  It only represents about 2-3 percent of their entire portfolio.

The end result is that approximately up to 10,000 homeowners will have their foreclosure stalled for a few weeks in order to allow time to work out modifications with them.  For those homeowners, this is certainly good news, especially considering the upcoming holiday season.

Many of the people I spoke to were surprised to learn that so few homeowners would be affected by the announcement.  The reason is simple however, the majority of homeowners in foreclosure took out loans that Fannie and Freddie would never dream of purchasing.  They were the no income, no asset, no credit check loans that are the root cause to our current financial market’s collapse.

And no amount of bailout or releif programs are going to be able to help most of those borrowers.  When they couldn’t verify income or assets in the first place, it is highly unlikely they will suddenly be able to now, and one of the major tenants of all of the announced releif programs are that the borrowers must show they are able to qualify for the new loan terms.