Fannie Mae, Freddie Mac Suspend Foreclosures Again

Government-controlled mortgage finance companies Fannie Mae and Freddie Mac said Friday they have immediately suspended all foreclosure sales involving occupied single-family and 2-4 unit properties through March 6. This is to give troubled borrowers more time to work with loan servicers to avoid losing their homes.

The move, which doesn't apply to vacant properties in foreclosure, is ahead of the Obama administration's roll-out of its national foreclosure prevention and loan modification program.

CNBC

The White House said President Barack Obama on Wednesday will outline his much-anticipated plan to spend at least $50 billion to prevent foreclosures in a speech in Arizona, one of the states hardest hit by the foreclosure crisis.

Both Fannie Mae and Freddie Mac , which were seized by federal regulators last fall amid the market meltdown, had suspended foreclosure sales during the winter holidays and halted evictions from foreclosed properties until next month.

Meanwhile, Citigroup, JPMorgan Chase and Morgan Stanley said they had placed a moratorium on foreclosing on some home loans to give the government time to launch a $50 billion mortgage relief program.

AP

The moratorium announcements come days after major bank chief executives committed to pausing mortgage foreclosures at a Congressional hearing.

As reported Thursday, Obama officials are working on a plan to spend $50 billion on foreclosure prevention and establish national standards for modifying home loans. The program would include possible government subsidies for homeowners who qualify.

Foreclosures have skyrocketed during the mortgage crisis. The National Association of Realtors said Thursday that sales of foreclosed homes helped drag the median price of existing homes to its lowest level since 2003.

Citigroup said its moratorium, which started on Feb. 12, will last until either President Barack Obama has finalized the details of a program for modifying mortgages, or until March 12, whichever comes first. It applies to mortgages that Citi owns, to borrowers living in their homes.

Morgan Stanley's moratorium started this week, and will last until March 6. It applies to the bank's Saxon unit, which collects payments on loans.

JPMorgan Chase said its moratorium will last through March 6, which it believes is enough time for the Treasury to announce a new mortgage modification plan.

Treasury Secretary Timothy Geithner Tuesday announced a plan to stabilize the financial system. One element of the plan is $50 billion of assistance to "prevent avoidable foreclosures" of middle-class homes occupied by their owners, according to a document Geithner released.

The Obama plan under consideration would seek to help homeowners before they fall into arrears on their loans. Current programs only assist borrowers that are already delinquent.

Under the evolving plan, homes would undergo a standardized reappraisal and homeowners would face a uniform eligibility test, sources said.

Bank regulators have used 38 percent of gross income as a benchmark for one mortgage relief program. If a homeowner is spending more than that amount on housing, they may qualify for a streamlined loan program, but the Obama administration may choose a lower percentage as a trigger for relief in any new plan.

In an interview, James Lockhart, the regulator that oversees government-controlled mortgage finance companies Fannie Mae and Freddie Mac, told Reuters the industry was eager to have a standardized loan modification standard.

"I've talked to all the major servicers—both the big bank ones and the big independent ones—and they are all ready to go, they're chomping at the bit,'' Lockhart, the director of the Federal Housing Finance Agency, said. "The other thing they're asking for standardization.''

© 2009 CNBC