Posted on: 28th Aug, 2012 02:18 am
massachusetts has requested fannie mae and freddie mac to offer what is known as "commercially reasonable loan modifications" as per a new law in the state. the notification was sent by state attorney general, martha coakley to the regulator of fannie and freddie in order to help struggling homeowners to cut mortgage debt.
martha coakley said the new law "highlights the imperative of preventing unnecessary foreclosures". it also promotes the idea that cutting of mortgage debt is one useful tool. however, it should be noted here that the law doesn't require creditors to specifically cut mortgage debt but it does imply the fact that creditors can receive higher recoveries when using strategies that include reducing mortgage debt for some borrowers.
it should be noted here that an fhfa spokeswoman said that the agency is reviewing the letter and will respond soon.
martha coakley said the new law "highlights the imperative of preventing unnecessary foreclosures". it also promotes the idea that cutting of mortgage debt is one useful tool. however, it should be noted here that the law doesn't require creditors to specifically cut mortgage debt but it does imply the fact that creditors can receive higher recoveries when using strategies that include reducing mortgage debt for some borrowers.
it should be noted here that an fhfa spokeswoman said that the agency is reviewing the letter and will respond soon.
If Fannie and Freddie accept this, then the creditors will have to take commercially reasonable steps in order to help the borrowers. They will also have to offer principal forgiveness as a commercially reasonable step in certain cases.
It has to be seen whether or not Ed DeMarco, director of the Federal Housing Finance Agency, will accept this offer. Earlier, he has resisted cutting mortgage principal on the loans that Freddie Mac and Fannie Mae own. He had also rejected an Obama administration plan to use funds from the government's bank bailout program to do so. He said that it could reduce the value of taxpayer's assets.
If Fannie Mae and Freddie Mac accept the request of the state of Massachusetts then it will ceratinly benefit a lot of home owners who are struggling to pay off their mortgage loans. In case comparatively easy mortgage modifications plea of the state Attorney General is accepted, then it will surely reduce the number of foreclosures in the state. This seems to be a good step to revive the mortgage market in the state of Massachusetts.