Program to help foreclosed borrowers
A Detour sign is posted at the main entrance to the Freddie Mac headquarters in McLean, Va.
TEXT OF STORY
Kai Ryssdal: Freddie Mac made some real estate news today. The mortgage giant said it's going to start letting some homeowners and tenants stay in houses that've been foreclosed on. It's not going to be free -- there'll be rent to pay. And it's not entirely altruistic either. Houses that are lived in stay in better shape than empty ones do. So you could say that Freddie's protecting its investments. And you could ask whether private lenders are going to follow Freddie's lead? Marketplace's Nancy Marshall Genzer reports.
Nancy Marshall Genzer: Here's how it works. If Freddie Mac owns the mortgage on your house and it's foreclosed upon, you get to stay on, paying rent to Uncle Freddie. The new policy applies to mortgage holders and to people renting houses in foreclosure. Fannie Mae offers a similar deal, but only to renters. Affordable housing advocates are calling on private lenders to join in. David Berenbaum is executive director of the National Community Reinvestment Coalition.
David Berenbaum: We heard from some lenders that they are beginning to initiate rental plans modeled on what Fannie and Freddie have done, while others are still examining it.
Guy Cecala: Three months ago, they probably would have said forget it.
That's Guy Cecala, publisher of Inside Mortgage Finance. He says, at this point, private lenders are just trying to stem their losses. And renters can help protect their property, just by taking a hot shower.
Cecala: You need somebody to run the utilities, the heat. Otherwise you have frozen pipes, you have basically, environmental damage.
Cecala thinks the Obama administration should use Freddie's program as a template for helping homeowners facing foreclosure. He says there's no broad solution, and this could be one of many smaller proposals. But Mark Zandi disagrees. Zandi is chief economist for Moody's Economy.com. He says the Obama administration must think beyond Freddie's little plan.
Mark Zandi: What the administration has to do is get to the heart of the problem. If someone gets into foreclosure and they've lost a home, then the administration hasn't done enough, because we're trying to forestall that.
Zandi says one way to do that is for lenders to reduce the size of mortgages for homeowners in trouble. He says existing solutions, like lowering interest rates and stretching out loans, aren't working.
In Washington, I'm Nancy Marshall Genzer for Marketplace.