Fannie Mae and Freddie Mac Face Criticism as They Resume Foreclosures
Law makers and Federal regulators put pressure on Fannie Mae and Freddie Mac, the government sponsored Mortgage guarantors, to suspend foreclosures while struggling homeowners pursue loan modification.
According to John Walsh, Acting Controller of Currency, testifying before a Senate banking committee, his agency is pressurizing national lenders to freeze foreclosures on struggling homeowners who are trying to pursue loan modification.
In particular, Walsh criticized the lender’s practice of dual tracking, saying it was needlessly confusing for struggling homeowners. Dual track process involves pursuing foreclosure and loan modification at the same time. The Senate committee is holding its second hearing since allegations of lenders indulging in careless paperwork and cutting corners broke into the limelight in September.
According to Fannie and Freddie, addressing senate questions on the issue for the first time, lenders and borrowers both gain from the dual track process. Vice President of Freddie Mac, Donald Bisenius, pointed out that dual track process reduces losses, avoids blight of neighborhoods and, in the long run, helps borrowers.
Bisenius said that if the foreclosure process drags on, it becomes more and more difficult for the homeowner to get current on his mortgage. He pointed out that foreclosure properties can cost up to $30 – $40 daily, amounting to $15,000 yearly.
Congress is monitoring the foreclosure process even as leading lenders like Bank of America and JP Morgan Chase ordered a freeze on foreclosures with the eruption of the robo signing scandal.
Law makers asked bank regulators what measure they have taken to ensure the propriety and legality of the foreclosure process. They also leveled criticism against the dual tracking process, calling it unfair and confusing. Law makers said they had received numerous complaints that banks were delaying granting of loan modification, often losing paperwork and not providing reasons for canceling trial modifications.
Governor of Federal Reserve Board, Daniel K. Tarullo, pointed out that the system faced a race between foreclosures and loan modification. He said that Preliminary review of the problem by the Fed revealed “significant weaknesses” in foreclosure procedures. He also said that this revealed structural problems in the industry for mortgage servicing. It revealed that major players in the servicing industry did not handle foreclosures appropriately.
Fannie Mae and Freddie Mac, however, defended the dual track system. They said the further the process takes, greater will be the arrears for the borrowers. The average time period for foreclosures is 449 days, which gives substantial time for borrowers to explore alternative options, they said.
Original post: http://www.e-foreclosuresearch.com/blog/fannie-mae-freddie-mac-resume-foreclosures/ on E-ForeclosureSearch.com, your source of a foreclosure homes.
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