This past Monday, regulators for Fannie Mae and Freddie Mac, two major mortgage lending companies in the United States, proposed to congress an idea that they believe will help alleviate bankrupt homeowners. Reuters reports from the Financial Times:
“The plan under review by the Federal Housing Finance Agency would call for the mortgage financing companies to allow bankrupt homeowners who owe more on their housing debt than their homes are worth to pay zero per cent interest for five years, the report said.”
While the government struggles to find a plan to alleviate the economic crisis, foreclosed homes continue to pop up in states across the country. The epidemic of homeowners in chapter 13 bankruptcy and those near it is a result of poor lending and now mortgage lending agencies are trying to play catch up. Fannie Mae, Freddie Mac & the FHFA make up for 90% of home loans in the country, which leaves these three top lending agencies responsible for coming up with a plan that help turn things around.
The proposal by the two lending companies might help alleviate homeowners for a few years, but what will be the end result? Will homeowners have enough time to catch up on finances to start paying interest rates?
Amy Brundage, a White House spokeswoman, responded to further inquiries about the recent proposal:
"While we continue to talk to the FHFA and other market participants about ways to help borrowers and support the housing market, the administration is not at this time considering this particular idea."
Perhaps the government has a better plan up their sleeve. What do you think about the proposal?