Freddie Mac Grants Three-month Suspension Of Mortgage Payments For Borrowers Affected
Return of Some September Payments to Cash-Strapped Storm Victims Planned
McLean, VA – Freddie Mac (NYSE:FRE) today announced several special policies intended to put emergency funds in the pockets of single-family mortgage borrowers impacted by Hurricane Katrina.
"We are determined to do all that we can to help the victims of this disaster," said Freddie Mac Chairman and CEO Richard F. Syron. "Therefore, we are instructing our servicers to suspend mortgage collections for the months of September, October and November in some of the key major disaster areas designated by the Federal Emergency Management Agency. This temporary suspension will apply to every borrower with a Freddie Mac-owned single family mortgage in these FEMA designated zones, regardless of the condition of their home," Syron said.
Following the three-month suspension, servicers have the discretion to continue suspending or reducing payments on Freddie Mac-owned mortgages for an additional nine months on a case-by-case basis, depending upon each borrower's specific circumstances, according to an advisory letter sent to Freddie Mac's 2300 single-family servicers. Servicers must make their determinations before the mortgage's December payment due date, Freddie Mac said.
The new policies apply only to Freddie Mac-owned loans on homes in major disaster areas designated by FEMA as qualifying for individual assistance. A servicer is the company to which borrowers send their monthly mortgage payments.
Another new policy announced today to help cash-strapped borrowers gives Freddie Mac servicers the discretion to return September mortgage payments that were already made, but not yet reported to Freddie Mac. Or, alternatively, the new policy gives borrowers the option to contact their servicers to request the return of their September payments to help them cope with short-term financial emergencies. In either case, borrowers will still be required to make all mortgage payments once the temporary suspension period ends.
In cases where borrower payments have been reported, servicers should contact Freddie Mac for additional instructions. Mortgage payments are typically not reported until the 16th of the month in which they are due.
"These temporary measures do not affect Freddie Mac's guarantee on its mortgage Participation Certificates," Syron said. "What's more, by continuing to fulfill our investor obligations while helping America's borrowers get back on their feet, we forcefully underscore Freddie Mac's capacity to help protect America's housing finance system and the broader national economy from the shock of unexpected events."
Other policy changes made in today's advisory letter instruct Freddie Mac servicers:
Not to report to credit bureaus any reversed and suspended payments on Freddie Mac-owned loans as a result of Hurricane Katrina during the suspension period;
To suspend all late fees, collection and foreclosure activities in the storm-affected areas during the three-month suspension period.
That they have the option not to advance interest on any Freddie Mac mortgage granted forbearance under the company's special Hurricane Katrina policies.
Today's announcement builds on Freddie Mac's decision last week to authorize servicers to provide a wide range of options to help borrowers in the declared major disaster areas to protect their credit ratings and financial interests in their homes, such as reducing or suspending mortgage payments for up to 12 months for borrowers with Freddie Mac-owned mortgages. If a servicer believes forbearance is needed beyond August 2006, the servicer can make that recommendation to Freddie Mac.
Freddie Mac and the Freddie Mac Foundation are also contributing a total of $10 million to organizations supporting relief efforts in the areas devastated by Hurricane Katrina, such as the American Red Cross.
Freddie Mac is a stockholder-owned company established by Congress in 1970 to support homeownership and rental housing. Freddie Mac fulfills its mission by purchasing residential mortgages and mortgage-related securities, which it finances primarily by issuing mortgage-related securities and debt instruments in the capital markets. Over the years, Freddie Mac has made home possible for one in six homebuyers and nearly four million renters in America.
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