America’s two largest mortgage lenders – Freddie Mac and Fannie Mae – have introduced a series of new measures to help those homeowners who are facing foreclosure…
The two mortgage giants, both of which were nationalized towards the end of last year, have announced plans which will help homeowners who would otherwise have to leave their homes to stay on as renters on month to month leases.
Whilst the move has already been heralded as a massive helping hand in the midst of the foreclosure crisis, with The Centre for Economic and Policy Research (CEPR) applauding the decision, it has been called a ‘mere drop in the ocean.’
“This move will provide relief to tens of thousands of families at very little cost to taxpayers,” said CEPR Co-Director Dean Baker.
“This is a crucial first step in addressing the economic woes caused by the collapse of the U.S. housing market and other lenders would do well to follow Fannie and Freddie’s lead,” he added.
As both Freddie Mac and Fannie Mae are now Government owned, they are more or less obliged to help out homeowners and they have been retooled as housing-aid agencies.
Last month, Fannie Mae suspended about 20,000 foreclosures and 6300 evictions by owners or renters, the company said.
As the new measures will allow people to remain in their own homes, it will offer them a degree of security and stability whilst costing taxpayers little and will also help to slow the fall of American property values due to foreclosed and vacated properties.
Other new measures include an extension of evictions of borrowers or renters due to foreclosure to the end of February.
There is also a scheme to help tenants whose landlords go into default. Instead of certain eviction, as was the case before, they may now be able to remain in their rented accommodation. There will also be a rent to own mortgage programme available for homeowners.
Tenants and homeowners will only have to pay market-value or existing lease rents, not the mortgage payments and Freddie Mac will hire a property management company to determine that amount.
They must be able to show proof that they have enough income to pay the monthly rental amount and Freddie Mac will also explore loan-modification options that might be available for some borrowers.
Freddie Mac officials expect the program to help about 8,600 families in 2009.
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