- Tom Silva
- Related Posts:
Fannie and Freddie to the Rescue?
Stressed single-family homeowners trying to pay their mortgages might be in for some relief after a recent move by Fannie Mae and Freddie Mac, the nation’s leading mortgage-finance issuers. Since being placed under a government conservatorship in September, Fannie and Freddie have devised a plan to help homeowners who are 90 days behind in their payments and have high loan-to-income ratios. The bailout could mean lower interest rates, and terms as long as 40 years to cut monthly payments to more affordable levels. Borrowers then have three months to become current on the modified payment, as long as they have proof of income and have not declared bankruptcy.
The proposal would reduce monthly payments to just 38 percent of the owner’s gross income. By lengthening the mortgage term by 10 years, payments for both principal and interest will be reduced. The plan is not part of the Treasury Department’s $700 billion bank rescue, and is not required of mortgage holders who receive government aid.
“With such broad adoption, this new protocol will be a standard for the industry to quickly move homeowners into long-term sustainable mortgages,” said Neel Kashkari, the Treasury’s interim assistant secretary said.
Any move to minimize foreclosures – and to help families stay in their homes – is good news for the economy at large. A housing recovery is vital to the economy’s overall health, and Fannie Mae and Freddie Mac are to be commended for taking the lead in this extremely positive development.