Senators push for foreclosure freeze

Fannie Mae and Freddie Mac were taken over as regulators tried to avoid further disruption of the housing market. (David McNew/Getty Images)

WASHINGTON - Senate Banking Committee members urged Fannie Mae and Freddie Mac, the mortgage companies placed under federal control this week, to freeze foreclosures on loans in their portfolios for at least 90 days.

"This action would provide immediate relief to many homeowners" and let the companies "turn these nonperforming loans into performing assets to minimize losses," Senators Charles Schumer, Robert Menendez, and other panel Democrats said yesterday in a letter to the companies and the Federal Housing Finance Agency, which is overseeing them under the government conservatorship. The companies also should ease their policies on modifying mortgages, the senators wrote.

Lawmakers and regulators, including Federal Reserve chairman Ben S. Bernanke, have pressed mortgage companies to help keep borrowers in their homes and out of foreclosure by reducing balances and changing loan terms.

Treasury Secretary Henry Paulson and FHFA director James Lockhart announced the takeover of Fannie Mae and Freddie Mac on Sunday, replacing their chief executives. The move came after the companies' combined $14.9 billion in net losses over four quarters threatened to further disrupt the housing market.

Fannie and Freddie can foreclose on loans they either own or guarantee, which is nearly half of the $12 trillion US residential mortgage market. While they can direct servicers to stop foreclosure proceedings, other stakeholders, including private mortgage insurers, have some say in the process.

"Schumer really has to start thinking about what's in the best interest of the majority of taxpayers and I'm not sure that freezing foreclosures is in the best interest of the majority of taxpayers," said Joshua Rosner, an analyst with independent research firm Graham Fisher & Co. in New York. "It would just prolong the agony."