Mortgage Foreclosure & Refinance Resource

Fannie Mae and Freddie Mac may no longer be able to lobby, but consumer advocacy groups sure can — and they’re already pressing regulators and legislators to see Fannie and Freddie enact wide-scale loan modifications for troubled borrowers. Think fdic and IndyMac, but on a much grander scale.

Four U.S. Senators (Charles Schumer (D-NY), Robert Menendez (D-NJ), Sherrod Brown (D-OH) and Bob Casey (D-PA)) have asked the conservators of Freddie Mac and Fannie Mae to freeze foreclosures on mortgages held by the companies for 90 days and to take immediate steps to assist homeowners by modifying delinquent loans.

The freeze would serve as a stopgap measure until the two companies, which were taken over by the U.S. government in an emergency rescue plan announced by Treasury officials last weekend, can perform wholesale loan modifications allowing millions of Americans to keep their homes.

The fdic said it would focus on actively modifying loans for delinquent and severely delinquent borrowers, employing so-called “affordability modifications” en masse; in other words, the fdic will look to write down loans to roughly whatever levels the borrower can afford, a strategy that has long been advocated by consumer groups but panned by industry representatives.

In the program details, the FDIC said it would look to put borrowers with various Alt-A loan products into “affordable” mortgages that would reduce their payment load down to a 38 percent payment-to-income ratio, including principal, interest, taxes and insurance — even if that means writing off principal, or reducing rates well below current market rates to get there.

Borrowers looking to qualify for the program would need to document their income and provide proof of primary residence, the FDIC said.

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