Massachusetts attorney general, Martha Coakley, filed suit against Fannie Mae and Freddie Mac in an effort to force them to work in compliance with a state anti-foreclosure law passed in 2012 that sought to ease the way for “buyback” programs aimed at reducing homeowners’ debt and saving lenders the cost of foreclosure and eviction.
Fannie and Freddie Refusing
According to the lawsuit, the federally owned mortgage giants have refused to allow homes with mortgages they back to enter buyback programs, regardless of the fact that it costs them money not to. “For too long, Fannie and Freddie have been roadblocks to progress in addressing this foreclosure crisis, and I urge them to immediately reverse their policy on this common-sense program,” Ms. Coakley said.Ms. Coakley, a Democratic candidate for governor, has made numerous efforts to police the banks’ treatment of homeowners. She has won settlements from Goldman Sachs, Morgan Stanley, RBS and several subprime lenders.
Ramon Suero’s Foreclosure
This lawsuit comes on the heels of a case by homeowner Ramon Suero. In 2005 Suero bought an apartment for about $300,000. It is now worth a third of that price. When he fell behind on his mortgage payments the home went into foreclosure. A nonprofit that runs a buyback program offered to buy it from the lender for what Freddie Mac said was the fair market price, $115,000. The nonprofit intended to turn it around and then sell it back to Suero for a mortgage price he could afford. But Freddie Mac refused to allow the sale, and even asked the nonprofit for a “make whole” price of the full $300,000. Now that Mr. Suero would not be able to stay in his home, Freddie Mac would incur the expense of evicting Mr. Suero, maintaining the vacant home, and then selling it as a distressed property. But a federal court stepped in and issued a preliminary injunction against the foreclosure and sale of the home.
Dozens of Homeowners
Elyse D. Cherry, chief executive and president at the nonprofit that runs the buyback program, said “dozens of homeowners, many of them immigrants and minorities in poor neighborhoods, had been prevented from taking advantage of the program because Fannie and Freddie had barred participation.”
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Source: The New York Times, Massachusetts Sues Fannie and Freddie Over Foreclosure Law, June 2, 2014