Fannie Mae, Freddie Mac Suspend Foreclosures For 60 Days To Provide Relief To Beleaguered Homeowners

The Federal National Mortgage Association and The Federal Home Loan Mortgage Corporation, better known as Fannie Mae and Freddie Mac, said Wednesday they plan to suspend mortgage foreclosures for 60 days to help Americans suffering from the economic impact of the coronavirus.

Fannie Mae and Freddie Mac together backstop about $5 trillion of home loans – or about half of the U.S. housing market.

The Wall Street Journal said about 182,000 homeowners are currently in some stage of the foreclosure process.

President Donald Trump separately said that the Department of Housing and Urban Development, or HUD, will suspend foreclosures and evictions through the end of April.

The Federal Housing Finance Agency, or FHFA, the regulator of Fannie Mae and Freddie Mac, will also extend mortgage payment relief to borrowers who require it as they struggle with job cuts and lost income.

FHFA Director Mark Calabria also noted that Fannie Mae and Freddie Mac will suspend property evictions for 60 days in order to prevent a potential increase in public health risks which might occur if more Americans were on the streets.

“This foreclosure and eviction suspension allows homeowners with an enterprise-backed mortgage to stay in their homes during this national emergency,” Calabria said in the statement.

HUD’s actions will benefit 8.1 million households with mortgages insured by the Federal Housing Administration, or FHA.

“Millions of Americans face significant financial hardships because of the coronavirus outbreak, which means some people will not have income,” said HUD Secretary Ben Carson. “So we have decided to make an attempt to stem the tide there by placing a moratorium on foreclosures.”

In early March FHFA said that Fannie Mae and Freddie Mac would provide payment forbearance to borrowers hurt by coronavirus. Under such forbearance, mortgage payments could be be suspended for as long as a year for affected borrowers.

Kathy Kraninger, Consumer Financial Protection Bureau Director, praise the housing agencies for the mortgage suspensions.

The bureau has “encouraged financial institutions to work with their customers affected by the coronavirus,” Kraninger said. “Consumers’ first stop in the face of hardship is with their creditors and their financial institutions, so our message was important for regulated entities to hear,” she added.

But Calabria asserted that the regulator isn’t offering these concessions to homeowners who are able to make their payments. Otherwise, such broad exemptions would put Fannie Mae and Freddie Mac out of business.

Fannie Mae and Freddie Mac were taken over by the federal government during the 2008 financial meltdown. After receiving a $191 billion taxpayer-funded bailout, Fannie Mae and Freddie Mac have since returned to profitability.

Politico reported that HUD Deputy Secretary Brian Montgomery said he was not engaged in any talks with the Trump administration about asking commercial lenders to suspend mortgage payments during the crisis (Italy suspended such mortgage payments last week).

Rather, Montgomery said the FHA has a “robust set of tools” to cope with turbulence in the housing market in a crisis. He noted that in the past they have suspended foreclosures and evictions for natural disasters like hurricanes.

“For the time being, it just hits the pause button and provides steadiness to the housing market,” Montgomery said. “This is a first step; people who were concerned about [losing their homes] can cross that off their list for now.”

Fannie Mae and Freddie Mac do not offer loans – rather they purchase loans and package them as securities which are subsequently sold to investors.