Fannie and Freddie Suspend Foreclosures-

Mortgage giants Fannie Mae and Freddie Mac have directed their network of servicers to halt all foreclosure and eviction proceedings between Nov. 26 2008 and Jan. 9, 2009, meant to give a recently announced rescue plan time to work.

The Streamlined Modification Program, set to launch Dec. 15, enables delinquent borrowers to get a modified mortgage that lowers payments to no more than 38% of their gross incomes.

Highlights include:

The mortgage rate could be lowered to as little as 3% for five years. After that, it would increase by 1 percentage point a year until it hits either the market rate or the original interest rate, whichever is lower.

Unlike previous federal efforts, participation by servicers is not voluntary.

Several major servicers — including Bank of America, JPMorgan Chase and Citigroup — have recently announced expansions of their foreclosure prevention efforts, which could aid nearly a million more borrowers.

This should help the Bay Area housing market and stabilize pricing in the region. The action should also aid in the reduction of inventory as the current REO properties are sold.

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