Barney Frank, Regulators Urge Suspension Of Foreclosures

February 11, 2009 · Filed Under Loss Mitigation 

Given the state of the current financial crisis, the House Financial Services Committee Chairman Barney Frank has asked many of the major banking companies to voluntarily put a moratorium on foreclosing on occupied homes.

In addition, the government has already placed such a moratorium on Fannie Mae and Freddie Mac, which has had a large positive impact through the month of January. This moratorium is also widely supported in the Office of Thrift Supervision.

The government expects that 90% of the banks will decide to put this moratorium in place, but has no plan for this and has no actual control. In addition, at least $50 billion of the final bailout money will be used to prop up foreclosures. Because of the small moratorium that is in place so far, foreclosures have already been cut by at least 26% in January, however, this is only because Fannie Mae and Freddie Mac are government controlled and, therefore, can be forced to do no foreclosures, which the government cannot do to any of the public banks, even under the current bailout rules.

This is likely to change when the next part of the bailout funds are released.

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