Well, now we know what it will take to put a stop to the foreclosure crisis – a massive storm affecting the entire Eastern seaboard. For homes in that area at risk of foreclosure, Fannie Mae and Freddie Mac will offer a small bit of mortgage relief:
The government-controlled mortgage finance giants said Tuesday that mortgage companies that collect payments for them can give breaks to homeowners affected by the storm. The aid will come in the form of a forbearance plan, which allows homeowners to delay payment on some or part of the loan, but the amount is still owed.
Fannie Mae said it allows mortgage companies, also known as loan servicers, to temporarily suspend or reduce a homeowner’s mortgage payments for up to 90 days without reaching the homeowner. After that, homeowners may get additional aid, typically for up to a year.
Similarly, HUD has announced a 90-day moratorium on foreclosures on homes with FHA mortgages in the path of the storm, among other measures.
This mainly goes toward New York and New Jersey, which is kind of interesting. See, both New York and New Jersey have put regulations in place that either criminalize foreclosure fraud or force foreclosure lawyers to personally attest to the veracity of loan documents and affidavits. This has predictably prolonged the foreclosure process in those states, because lawyers don’t want to attest to the veracity of clearly false documents. Mortgage giants like Fannie Mae and Freddie Mac have been grumbling about this for a while now. In fact, their conservator, the Federal Housing Finance Agency, proposed higher mortgage fees in New York and New Jersey as an indirect means to spur those states to change their rules and allow for faster foreclosures.
Now that Superstorm Sandy has devastated many regions of those states, now Fannie and Freddie come crawling back to play the nice guy. But just a couple months ago they wanted to penalize those states for protecting their borrowers from foreclosure fraud and enabling them due process.
I’m wondering when someone will blame Fannie and Freddie for contributing to the clog in the foreclosure pipeline.