Fannie Mae Is Continuing with Efforts to Modify Loans

Although the extended grace period for keeping on hold foreclosures expires on 31st January 2008, Fannie Mae is continuing with efforts to modify loans.

Fannie Mae has agreed to work with Neighborhood Assistance Corp. of America. The latter had been a strong critic of Fannie. This agreement is one of the many steps being taken by Fannie Mae and Freddie Mac to prevent further escalation of foreclosures. They are streamlining the modification procedure and also suspending foreclosure sales and evictions beyond the expiry date of 31st January 2008.

This is due to mounting pressure coming from many quarters – the regulators, the governments and other lenders to modify loans to more affordable terms. More foreclosures are further pushing down the real estate market.

Recently the Federal Reserve developed a strategy to modify the loans (tied to assets) it has got from the federal bailouts. The Federal Deposit Insurance is going ahead with its own plans for making fresh agreements with the old unworkable mortgages.

Although the understanding with Fannie is yet to be announced, the chief executive of NACA Bruce Marks confirmed the deal. The NACA is a non-profit based in Boston. It has regularly been holding demonstrations to pressurize the banks to cooperate with it to modify loans on fair terms.

Marks has termed Fannie Mae to be a “major roadblock” to the efforts for foreclosure prevention. It organized a demonstration outside the headquarters of Fannie in Washington towards the end of October. The entrance was blocked until Marks was allowed a meeting with the CEO of Fannie Mae, Herbert Allison.

The NACA is trying to reach a similar understanding with Freddie Mac according to Marks. Fannie Mae and Freddie Mac jointly guarantee about half of all the mortgages in the country. When borrowers become delinquent they try to work out a modification with the lenders. Both Fannie and Freddie have to hold talks regarding this with their regulator – Federal Housing Finance Agency before taking action.

The NACA brokers talks between the two contending parties – the lenders and the borrowers. It is already working with Bank of America and Wells Fargo as well as other important lenders. The NACA first studies the income of the borrower to find out how much the latter can really afford and then they try to make the lender bring down the rate to practical and realistic levels. Bruce Marks claimed that NACA has successfully helped 20,000 mortgage holders in the past one year to avoid foreclosures.