Fannie Mae and Freddie Mac said on Monday they would provide a break for borrowers facing foreclosure to ensure those having problems making monthly mortgage payments will remain in their homes during the holidays.
Fannie Mae said its eviction moratorium would apply to single-family homes and two- to four-unit properties from Dec. 19 through Jan. 2, 2013. Freddie Mac said it would offer the suspension from Dec. 17 through Jan. 2, 2013.
The aid allows families to avoid eviction during that time, but doesn’t mean the foreclosure process will be put on hold.
The inventory of foreclosed homes remains a problem for the nascent U.S. housing market recovery, and has been weighing on property values. More than 3.5 million homes have been foreclosed on in the last four years, and about 10.8 million borrowers owe more than their properties are worth.
“We’re taking this step in support of families who have faced financial challenges,” said Terry Edwards, executive vice-president of credit portfolio management at Fannie Mae. “The holidays are a chance to be with loved ones and we want to relieve some stress at this time of year.”
The government-backed mortgage lenders encouraged homeowners to promptly reach out for help and also promoted resources for those at risk of losing their home, including mortgage help centres, hotlines and websites with more details on foreclosure alternatives.
Both Fannie Mae and Freddie Mac, formally known as the Federal National Mortgage Association of Washington and Federal Home Loan Mortgage Corp., have already provided foreclosure aid to borrowers with government-owned loans that are dealing with disaster-related damage in the wake of Hurricane Sandy. The two companies have had moratoriums to relieve burdens for borrowers around the holidays for the past couple of years.
Fannie and Freddie, the two largest sources of U.S. housing money, were taken over by the government in September, 2008, at the height the financial crisis.
The companies do not directly make loans. To provide a steady stream of funds, they buy mortgages from lenders and either hold them or repackage them as securities, which they sell to investors with a guarantee.