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Monday, September 12, 2005

Freddie Mac Asks Lenders to Return Mortgage Payments to Katrina Victims

What is happening in the mortgage market in New Orleans?  Will there be a large number of loan defaults?  Not initially:

Freddie Mac offers temporary relief, CNN/Money:  Government housing agency Freddie Mac is suspending mortgage payments for borrowers affected by Hurricane Katrina and is planning to return some payments to cash-strapped storm victims. ...

[T]he three-month suspension of mortgage collections applies to every borrower with a single-family home mortgage held by Freddie Mac in areas designated as major disaster zones. ... The suspension applies regardless of the condition of the victims' homes... The Mortgage Bankers Association estimates that up to 360,000 loans valued at up to $48 billion could be directly or indirectly impacted by the storm, although it is not clear how many of those loans are owned by Freddie Mac... [Lenders] can extend the suspension period for Freddie Mac-owned mortgages up to a full year on a case-by-case basis, depending on the borrower's specific circumstances ... Freddie Mac also authorized ... lenders to return to borrowers payments on Freddie Mac-owned mortgages already made for September but not yet reported to the government agency...

I also wonder what will happen to renters who have signed a lease.  If the house payment is suspended, will rental payments still be collected? 

The article did not give a breakdown of the loans covered by Freddie Mac, so let me add this, originally from the WSJ:

...the Mortgage Bankers Association said. Fannie Mae and Freddie Mac ... own or guarantee around half of the $8.3 trillion of U.S. residential mortgage debt outstanding... Based on the experience of past hurricanes ... neither company is likely to face major losses. The credit risk on most mortgages that aren't backed by Fannie, Freddie or the Federal Housing Administration is borne by holders of so-called nonagency mortgage securities. Mortgage analysts at UBS AG in New York released a report this week estimating that less than 1 percent of the amounts due on loans backing such securities are in the ZIP Codes most affected by Katrina.

    Posted by on Monday, September 12, 2005 at 01:35 AM in Economics, Housing | Permalink  TrackBack (0)  Comments (1)

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