(Adds analyst comment, company comment and background)
NEW YORK Nov 20 Fannie Mae and Freddie Mac,
the two biggest U.S. home loan finance companies, on Thursday
said they would suspend foreclosures of occupied homes until
early 2009, as the government moves to stem the tide of home
losses plaguing the economy.
Fannie Mae FNM.P and Freddie Mac FRE.P said the hiatus
on foreclosures -- which will run from Nov. 26 through Jan. 9
-- will give mortgage servicers more to work out easier
borrowing terms for troubled homeowners.
Regulators and lawmakers have leaned harder on the two
companies to help stabilize the crumbling U.S. housing market
since they own or control about half of residential mortgages
The government effectively seized Fannie Mae and Freddie
Mac in a conservatorship in September amid concern that steep
mortgage losses were hurting their ability to remain viable and
thus backstop the mortgage market.
"This is another news item that the government is hoping
will stem the tide of foreclosures," said Walter Schmidt, head
of mortgage strategy at FTN Financial Capital Markets in
Chicago. "But I don't know it helps, it could put off the
inevitable" because falling home prices give homeowners
incentives to walk away, he said.
The move by the two government-sponsored enterprises comes
a week after their regulator unveiled a plan that could cut
payments for hundreds of thousands of borrowers by easing terms
on their loans. Homeowners facing foreclosure who are spending
more than 38 percent of their income on mortgage payments could
have payments reduced by the companies, under the program.
Loan modifications by lenders have increased but so far
failed to stop record increases in foreclosures.
The "streamlined modification" program of Fannie Mae and
Freddie Mac is slated to begin on December 15. Fannie Mae and
Freddie Mac estimated their foreclosure suspensions may affect
about 16,000 borrowers if the homes are occupied.
"We felt it was in the best interest of both borrowers and
Fannie Mae to take this extra step to ensure that homeowners
with the desire and ability to prevent a foreclosure have an
opportunity to stay in their homes," Herb Allison, Fannie Mae's
chief executive officer, said in a statement.
The foreclosure moratorium also appears to lend credence to
speculation the government is pushing the companies to operate
more in a public policy role, perhaps at the expense of profit.
That has some investors concerned since the government has not
defined the roles of the shareholder-owned companies after the
conservatorships are lifted.
(Reporting by Al Yoon and Dan Burns)