Fannie Mae and Freddie Mac, home mortgage agencies, take over or issue many Americanâ€™s mortgages. The US government backs Fannie and Freddie mortgages. While some may think that Fannie and Freddie will always help borrowers in financial trouble that is not always the case.
Some organizations, such as Stabilizing Urban Neighborhoods (SUN), a Massachusetts non-profit, attempt to help distressed homeowners. When someoneâ€™s property is worth less than its mortgage, it is said to be â€œunderwater.â€ SUN conducts buybacks according to a June 2, 2014 New York Times article. They buy the home from the borrower and sell it back to them, reducing the mortgage in the process. This helps people across the nation avoid foreclosure.
Fannie and Freddie, however, will not allow buybacks. One apartment owner had a $300,000 mortgage, but his apartment is now worth $100,000, so his property is underwater. SUN tried to help as his apartment was being foreclosed, but Fannie and Freddie would not approve the buyback. A court issued an injunction preventing the foreclosure, at least for now.
As a result of these practices, which cost taxpayers money (Fannie and Freddie must evict a homeowner, maintain the house and then try to sell it after a foreclosure), the Massachusetts Attorney General has filed a lawsuit against Fannie and Freddie. The purpose of the lawsuit is to force Fannie and Freddie to follow and enforce a state law. It is hoped that non-profits, like SUN, will be able to help distressed mortgage borrowers once the court makes a decision.
If you are facing financial trouble, whether you are behind in your mortgage, auto loan or credit card payments, then you may wish to consider bankruptcy. A Chapter 7 bankruptcy is a â€œliquidationâ€ bankruptcy in which most debts are wiped out, giving you a fresh start. Jayson Lutzky is an attorney with over 31 years of experience practicing law in New York State. He has in office in the Bronx and offers free in person consultations for matters related to bankruptcy. Call 718-329-9500 to set up a confidential, no obligation appointment. Visit www.MyNewYorkCityLawyer.com to learn more about Mr. Lutzkyâ€™s office.