Fannie, Freddie Extend Foreclosure Eviction Freeze & Launch Rental Program

Fannie Mae and Freddie Mac put a freeze on foreclosure evictions through January 9, but have decided to extend the date to March.

In addition, Fannie and Freddie are launching a program that will allow qualified owner-ocupants and renters the chance to rent the property back from them on a month-to-month basis at market rental rates.

Fannie and Freddie are allowing renters in homes owned by Fannie Mae and Freddie Mac that have been foreclosed to remain in the property and enter into a month-to-month lease. The program also allows troubled owner-occupants who have been unable to modify their mortgage a chance to lease the property after foreclosure takes place.

Though I applaud Fannie and Freddie for launching the program that allows renters to stay in the property because their landlords (the owners/borrowers) have been foreclosed on (and I hope private lenders follow suit), I don't necessarily agree with allowing owner-occupants/borrowers to rent the property back after they've been foreclosed on.

That may sound harsh, but hear me out…

Many people are just walking away from the mortgages and homes because they don't feel like paying their mortgage and/or are upside down and don't want to wait for the market to rebound to get their money back - even though they're fully capable of paying their mortgage in full and on time. These people are abusing the system (imho).

Once these people hear that they can walk away from their $3000 per month mortgage and rent the property for $1500 per month without ever having to pack a box or move a thing, what do you think they'll do?

Unless Fannie and Freddie are strict and only give the very "qualified" borrowers/owner-occupants that chance, the program will get abused.

I would like hear what Fannie and Freddie mean by "qualified owner-occupants", something they haven't released details on yet. 

Source: MarketWatch.com and The Wall Street Journal (WJ.com)

Fannie Mae Suspending Foreclosures Through January 2009

Fannie Mae just announced that it will be suspending foreclosure sales through January 9, 2009 in order to focus on its streamlined modification program, which it announced on November 11. 

Here's an excerpt from the press release:

"The temporary suspension of foreclosures is designed to allow affected borrowers facing foreclosure to retain their homes while Fannie Mae works with mortgage servicers to implement the streamlined modification program scheduled to launch December 15. Foreclosure attorneys and loan servicers will be instructed to use the additional time to reach out to borrowers who have defaulted on their loans and continue to pursue workout options. The initiative applies to loans owned or securitized by Fannie Mae.

The streamlined modification program is aimed at the highest risk borrower who has missed three payments or more, owns and occupies the primary residence, and has not filed for bankruptcy.

Fannie Mae will be working with foreclosure attorneys and servicers to reach out to the more than 10,000 borrowers the company estimates would be affected during this period. Borrowers who have Fannie Mae loans that are scheduled for foreclosure between November 26, 2008 and January 9, 2009, will be contacted directly by the attorney handling the foreclosure. If the home is occupied, Fannie Mae has instructed servicers and attorneys to suspend the foreclosure."

This is good news for the most troubled of home owners with Fannie Mae loans. This is also good news for the future of the foreclosure real estate market should some of these folks work out their loans and avoid foreclosure because it will help diminish some of the future bank-owned/foreclosure real estate market inventory. Though how much of an effect it will truly have is yet to be seen.

Hat tip to RealEstateZebra.