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Quick Hits: Fannie, Freddie Suspend Foreclosures for Yuletide Season

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Brief scrutiny of today's headlines.

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Fannie Mae (FNM) and Freddie Mac (FRE), the mortgage-finance companies at the center of the current economic mess, wish you a happy holiday season.

The government-sponsored enterprises will suspend foreclosures and evictions from November 26th to January 9th.

The agencies own or guarantee about $5.2 trillion of the $12 trillion US home mortgage market and were placed under government control September 6th.

Fannie and Freddie are working with HOPE, a coalition of major US mortgage servicing companies organized by the government, to help borrowers who are at least 90 days behind in their payments reduce their monthly bills. Interest rates may be reduced for up to 5 years and repayment terms may be extended to as much as 40 years.

But Fannie and Freddie are being generous with other people's money. In the third quarter, the agencies reported losses totaling about $54.3 billion. Freddie says it needs $13.8 billion from the US Treasury to stay afloat and Fannie says it may need a handout from Uncle Sam early next year.

In September, US Treasury Secretary Henry Paulson created a $200 billion backup fund for Fannie and Freddie. He said failure of the companies threatened the stability of the US economy.

The housing market has been pounded by falling prices and rising unemployment. Prices in 20 major metropolitan areas declined in July at the steepest rate on record. Sales of previously owned homes fell in August to a rate about 30% below the peak reached in September 2005. Owners of about 765,000 properties have received default notices.

So thanks for the breathing space on foreclosures, Fannie and Freddie. When do we get the economy back?
No positions in stocks mentioned.
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