Fannie, Freddie halt foreclosures

Washington - Mortgage finance companies Fannie Mae and Freddie Mac are suspending foreclosures for about 16 000 US households during the holiday season.

The two companies said on Thursday that they will halt foreclosure sales between November 26 and January 9, while they evaluate whether borrowers qualify for a new loan modification programme announced last week.

Fannie Mae said about 10 000 households would be affected, while Freddie Mac said the changes would affect about 6 000 borrowers who are facing foreclosure. The change does not apply to vacant homes.

The announcement "provides a new measure of certainty to many of these families during the holidays," Freddie Mac chief executive David Moffett said in a release.

Both Fannie and Freddie were seized by the government on September 7. The companies' former CEOs were ousted and the government now has direct control over the pair.

Fannie and Freddie's loan modification plan aims to help abate the foreclosure crisis by aiding homeowners who have fallen at least three months behind on their payments, but only if their loans are held by the two companies.

Under the programme, the new primary mortgage payments - including taxes and insurance - shouldn't total more than 38% of homeowners' pretax monthly income.

Fannie and Freddie are the dominant players in the US mortgage market but hold only 20% of delinquent loans. Ultimately about 400 000 households are likely to qualify for the loan modification programme, according to Priya Misra, a mortgage analyst with Barclays Capital.

By contrast, the Federal Deposit Insurance estimates that more than 4.4 million borrowers will become delinquent by the end of next year, not including loans backed by Fannie and Freddie.

- AP