Freddie Orders Servicers to Halt Hurricane-Hit Foreclosures

For areas affected by Hurricane Ike in Texas and Louisiana, Freddie Mac has ordered servicers to suspend all foreclosure sales until the end of the year on homes with loans owned by the government-run company. The decision follows more extreme calls for loan forbearance by servicers in the wake of Hurricane Katrina.


Freddie Mac sent letters to servicers with which it does business, calling for them to temporarily halt any foreclosure proceedings in the federally-declared disaster areas hit by the storm.

The temporary suspension will be in effect from October 8 to December 31, 2008, and includes any mortgages that may have been in default even before the storm hit the coastline.

Upon the completion of the suspension period, servicers will be required to consider individual circumstances in determining whether to proceed with foreclosure or extend additional foreclosure relief to the homeowner.

"Freddie Mac is taking this step because the extensive damage Hurricane Ike caused has made it difficult for our servicers to get the information they need to make case-by-case decisions about forbearance or other workout options," said Ingrid Beckles, Freddie Mac’s vice president of servicing and asset management.

The company indicated that the announcement only applies to properties with Freddie Mac-owned mortgages in Texas or Louisiana counties, municipalities or parishes declared federal disaster areas and where federal aid in the form of individual assistance is available.

In Sept. 2005, Freddie Mac told servicers to suspend loan payments for 90 days, during which time the company agreed to advance the monthly payments to investors holding securities backed by the loan payments.

After 90 days, lenders were given the opportunity to decide whether to extend the forbearance period to as long as a full year.

At the conclusion of the forbearance period, borrowers were to be given a new pay plan that will allow the borrower to catch up with their payments, according to Freddie Mac.

In an unprecedented move, Freddie Mac asked banks to return that month’s mortgage payments to people displaced by Hurricane Katrina.

The company sent an advisory letter to 2,300 loan servicers, urging them to return automatic deductions to the borrower's bank account, to send checks back upon request, and to allow borrowers a full year to forgo monthly payments.

Similar measures were taken when Hurricane Rita followed in Oct. 2005.

Freddie Mac ultimately extended its forbearance policy three more times in the next 12 months for a total of 18 months of forbearance.

In addition to providing mortgage payment relief, Freddie Mac streamlined our loan modification requirements so that servicers could easily assist homeowners seeking to hold on to their homes, in some cases.

“Freddie Mac provided workouts on more than 3,000 loans for Gulf homeowners who wanted to stay in their homes,” said Janet Eakes, Senior Vice President of Single Family Operations.

Posted on Wednesday, October 15, 2008 by staff