Happy holidays, from your friends in the U.S. government — at least, that seems to be the message sent Thursday afternoon by both Fannie Mae (FNM) and Freddie Mac (FRE), both of whom said they will suspend foreclosures and evictions on occupied homes until Jan. 9 of next year. The twin mortgage finance giants said the decision to suspend foreclosures for the next six weeks came as part of an effort to work () The FHFA is effectively managing the GSEs on behalf of the U.S. government, after both GSEs were placed into conservatorship earlier this year. () Between the two GSEs, the decision not to schedule foreclosure sales or eviction lockouts until next year will affect roughly 16,000 borrowers. It also underscores the sort of direct influence the government has had on the GSEs. “The private market GSEs would not have done this,” said one attorney that works with both firms. “This will cost money, expenses that will ultimately be picked up directly by Fannie and Freddie.” Or by the U.S. taxpayer. On Nov. 14, Freddie posted a $25.3 billion third quarter loss and requested $13.8 billion from the U.S. Treasury, after deferred tax asset write-offs left the company with a stockholder’s deficit. And Fannie Mae signaled in its quarterly filing with the Securities and Exchange Commission that it would likely need to tap Treasury funding as well by the end of this year, as well. What the freeze won’t do The halt in foreclosures won’t mean that all default management activity stops. Both GSEs have instructed their retained attorney networks to continue to process new foreclosures, as well as those foreclosures or evictions that have their respective dates scheduled for after Jan. 9. It also won’t affect foreclosures on vacant properties, both GSEs said. Bankruptcy cases, including motions for relief from stay, are also not impacted by the foreclosure sale halt and should be handled in accordance with existing guidelines, according to a notice sent to attorneys retained by both companies. The decision to halt foreclosures also isn’t silencing a growing number of critics that say they’re angry at all of the resources and attention being given to troubled borrowers. At HW in the past few days, we’ve been buried under feedback from lenders and servicers — and even employees at both GSEs, too — that have largely expressed frustration at what they see as a bailout of irresponsible borrowers, at the expense of responsible ones. But it’s not just industry insiders asking questions. The San Francisco Chronicle‘s Kathleen Pender last week went ahead and asked the question that’s likely on every borrower’s mind: am I an idiot to keep paying your mortgage? Her conclusion: for borrowers with little equity in their homes, “it’s getting harder to answer that question, especially when our government keeps giving people who owe more than their homes are worth so many reasons not to pay.” Beyond borrower discontent, another outcome could be possible with the growing use of foreclosure freezes: class-action lawsuits on behalf of borrowers that have already lost their homes, suing lenders and servicers for not offering them the same sort of opportunity to stay in their home. The specter of lawsuits has been raised repeatedly by some of HW‘s sources in the legal community during the past few weeks, but so far, none have materialized. Write to Paul Jackson at [email protected]. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.

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