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Dow Jones & Company, Inc. Reproduced with permission of copyright owner. Further reproduction or distribution is prohibited without permission.Fannie Mae has reached an agreement to work with one of its former critics, Neighborhood Assistance Corp. of America, to prevent foreclosures by reworking home mortgages to make them easier to afford.
The agreement is one of several measures the government-backed mortgage company and its main rival, Freddie Mac, are working on to avoid a further jump in foreclosures. The companies recently announced streamlined procedures for modifying loans and a suspension of foreclosure sales and evictions that is due to end Saturday.
The moves come amid a growing push by regulators, government officials and lenders to rework more loans in an attempt to halt a surge in foreclosures that is pushing home prices down sharply. The Federal Reserve recently developed a policy to modify mortgages tied to assets it acquired through recent federal bailouts, and the Federal Deposit Insurance Corp. is pushing its own formula for loan workouts.
The agreement with Fannie hasn't been announced but was confirmed by the company and by Bruce Marks, chief executive of the NACA, a Boston nonprofit with a history of holding protests to pressure banks into cooperating with its efforts to provide mortgages on what it considers fair terms.
Mr. Marks has branded Fannie a "major roadblock" to foreclosure-prevention efforts and led a protest outside Fannie's Washington headquarters in late October, blocking the entrance until he was allowed in to meet with the company's CEO, Herbert Allison.
The NACA is negotiating a similar cooperation agreement with Freddie Mac, Mr. Marks said and that company confirmed. Fannie and Freddie own or guarantee nearly half of all U.S. home mortgages. They work with lenders to find solutions when borrowers fall behind on those loans.
Fannie and Freddie both need to consult with their regulator, the Federal Housing Finance Agency, before proceeding with the cooperation.
The NACA, which acts as an intermediary between borrowers and lenders, already works with Bank of America Corp., Wells Fargo & Co. and several other large lenders in reworking troubled mortgages. The NACA's approach involves examining borrowers' budgets to determine how much they can afford to pay for their mortgage and then reducing the interest rate and, in some cases, the principal enough to reach that level.
Mr. Marks said the NACA has helped rework more than 20,000 mortgages over the past year.
Credit: By James R. Hagerty
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