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Fannie Mae Rescues Homeowners From Foreclosure

By Sally Maison
Published: Friday, June 18th, 2010

56400763The government-controlled Federal National Mortgage Association announced last Thursday that mortgage portfolio for April has grown. FNMA, or more commonly known as Fannie Mae, made measures to reduce its number of serious delinquencies last March on single-family loans that were guaranteed under their company.

The company tried to diminish the delinquency rate by repurchasing loans that were 4 months or 120 days delayed at least. In private lending companies, homeowners who were unable to pay for their mortgage within 90 days are already considered delinquent payers and run the risk of facing a foreclosure. But since Fannie Mae is government-controlled and has an open access to the treasury until 2012, people can expect more help coming from it.

Therefore, Fannie Mae has been repurchasing loans that inflate the mortgage holdings of the company through all these buyouts. The growth pattern is also outstanding. With the unpaid principal balance up with 46.4% growth, the balance of its gross mortgage portfolio also gave the company other financial concerns.

Fannie Mae and Freddie Mac (or Federal Home Loan Mortgage Corporation) are currently purchasing home loans with delinquencies. They are now hitting $145 billion when both corporations combine the federal aid they issue to troubled homeowners. The loans that are being bought again by these two government loan corporations are those which exceed 120 days of late payment and are a capital drain.

In the world of credit, being 120 days late on a particular loan makes the debtor suffer several consequences. The most common and obvious of these consequences is having a lower credit score. Having a lower credit score means the debtor will have to pay larger interest fees. It affects his monthly payments of his dues. Loan payments are diverted into interest payments instead and it will take longer to pay off his debt.

When this happens, people who are in the brink of having their houses foreclosed might further be indebted and soon be forced to leave their houses once the bank reclaims it.

But since Fannie Mae and Freddie Mac are now rescuing homeowners from having their houses foreclosed, it has since been easier to evade foreclosure. The goal of minimizing the number of foreclosed houses is achieved. However, this is just one of the short term goals and what the corporation can do meanwhile is to help the people find ways to earn enough money to pay their mortgage on time.

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