From International Herald Tribune
Fannie Mae and Freddie Mac plan to help U.S. homeowners
By Edmund L. Andrews
Tuesday, November 11, 2008
WASHINGTON: Fannie Mae and Freddie Mac, the mortgage-finance giants now controlled by the U.S. government, said Tuesday that they planned a broad new effort to reduce the loan burdens of homeowners facing foreclosure.
The program will be offered to people who are at least 90 days behind on their payments, according to government officials. The goal will be to modify the mortgage – most likely by reducing the interest rate – so that the monthly loan payment is no higher than 38 percent of the borrower’s monthly income.
The government plan could help as many as 300,000 families that are delinquent in their mortgage payments, and the costs would ultimately be picked up by taxpayers. But people with knowledge of the details said Tuesday that it was more limited than a program advocated by Sheila Bair, chairman of the U.S. Federal Deposit Insurance Corp.
The plan may apply only to so-called conforming mortgages that Fannie Mae and Freddie Mac have guaranteed. While there are trillions of dollars worth of those loans, they are far more conservative than, and generally separate from, the bulk of subprime loans that are at the heart of the nation’s foreclosure crisis.
The foreclosure rate on loans owned by Fannie Mae is about 1.72 percent. By contrast, the foreclosure rate on adjustable-rate subprime loans is nearly 20 percent, according to the Mortgage Bankers Association.
Nevertheless, officials said the new program amounted to the biggest ever government-funded effort to refinance people with substantially less-expensive mortgages in order to keep them in their homes.