WASHINGTON — A group of Senate Democrats are calling on the new leadership of the government-sponsored enterprises to put an immediate and temporary foreclosure freeze on all loans owned by Fannie Mae and Freddie Mac.
"We are calling on Fannie Mae and Freddie Mac to declare a temporary moratorium of at least 90 days on all impending foreclosure proceedings on whole mortgages held within each firm's portfolio, and to conduct an immediate and thorough review of those mortgages," wrote Sens. Charles Schumer, Robert Menendez, Bob Casey, and Sherrod Brown in a letter to the head of the Federal Housing Finance Agency James Lockhart and the two new top executives at the GSEs.
The senators also called for Fannie and Freddie to "revisit their policies and practices governing modifications involving mortgage-backed securities issued by the respective agencies." They cited Fannie's requirement that loans can only be modified if they are delinquent for 120 days, at which point the servicer must purchase the loan whole from the MBS prior to modification.
"Requiring four months of delinquency only furthers the likelihood that homeowners will be forced into foreclosure.... A true loan modification remains far more preferable to an additional loan made to a delinquent borrower," the senators wrote.
The senators said there was no reason for the GSEs not to change their practices now that they are under conservatorship and that invoking such practices would benefit taxpayers and homeowners.
"These changes would have the additional benefits of reducing risks to taxpayers and alleviating the downward pressure on housing prices which threaten all homeowners regardless of the type of loan they have or who owns that loan," the letter said.
The government seized Fannie and Freddie on Sept. 7. Since then, the Finance Agency has said it plans to discuss modifications procedures with the two GSEs in an effort to speed them up.