Sun, Feb 15, 2009 - Page 11 News List

US finance giants freeze foreclosures

MORATORIUM The move came amid calls by lawmakers for a reprieve, with Freddie Mac, Fannie Mae, Citigroup and JPMorgan promising a freeze until early next month

AFP , WASHINGTON

Two US banks and top mortgage finance giants have imposed moratoriums on home foreclosures until a comprehensive government plan emerges to ease the mortgage crisis, officials said on Friday.

The moves came following calls by lawmakers for such a reprieve and as the White House announced US President Barack Obama would unveil the plan on Wednesday.

JPMorgan Chase and Citigroup, as well as government-controlled mortgage finance units Freddie Mac and Fanny Mae, said they would freeze home foreclosures at the epicenter of global financial turmoil that has slammed the brakes on economic expansion.

Jamie Dimon, chief executive of JPMorgan Chase, said in a letter to a key Democractic lawmaker that his bank would impose a three-week foreclosure moratorium through March 6.

“We stand ready to work with you to put the appropriate processes in place, including a national modification standard, to reduce the incidence of foreclosure and to encourage long-term, sustainable home mortgages,” he told Barney Frank, head of the House of Representatives’ financial committee.

“We believe three weeks is adequate time for the Treasury to announce — and for us to implement — a new plan,” he said.

Citigroup said in a statement on Friday its moratorium, effective Thursday, could last until March 12.

Company CEO Vikram Pandit had told lawmakers on Wednesday that the bank would offer the reprieve, saying the bank would “commit to making sure that people stay in their houses,” a Citigroup spokesman said.

Citigroup said it would extend the moratorium until Obama has finalized the details of a loan modification program or on March 12, whichever is earlier.

“The company will not initiate or complete any new foreclosures on eligible customers during this time,” it said.

Obama is scheduled to outline a plan to address the home mortgage crisis on Wednesday, White House spokesman Robert Gibbs said on Friday.

Freddie Mac and Fanny Mae said in separate statements on Friday they were immediately suspending all foreclosure sales through March 6. The suspension does not apply to vacant properties.

“The extension will provide servicers with more time to help troubled borrowers find an alternative to foreclosure,” Freddie Mac said in a statement.

Since the beginning of the US mortgage crisis in 2007 that sparked global financial turmoil, Citigroup said it had worked with about 440,000 homeowners to avoid potential foreclosures on combined mortgages totaling about US$43 billion.

The US Treasury said this week that it would commit US$50 billion to prevent home mortgage foreclosures.

“Stemming foreclosures and restructuring troubled mortgages will help slow the downward spiral harming financial institutions and the real American economy,” it said in a statement on Tuesday.

“We will soon be announcing a comprehensive plan” that among others will drive down overall mortgage rates, the Treasury said.

To drive down mortgage rates, the authorities remained committed to spend as much as US$600 billion for purchasing of mortgage-backed securities and debt, it said.

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