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December 1st, 2011

Evictions take a holiday

by Peter Miller


WinterThe fact that consumers spent a record-breaking $52 billion this Black Friday bodes well for our country’s economy. But luckily for struggling homeowners, this holiday season will include more than just retail sales and markdowns. Following cues from previous years, Freddie Mac has announced that it will suspend all foreclosures from Dec. 19, 2011, to Jan. 2, 2012.

“If the property is occupied, our foreclosure attorneys will suspend the eviction to provide families a greater measure of certainty during the holidays,” said Tracy Mooney, senior vice president of servicing and REO at Freddie Mac.

Why no holiday evictions?

Holiday evictions slow for several reasons. For starters, in many states it’s freezing cold and most courts simply aren’t willing to toss families out on the frozen streets. Furthermore, a lot of sheriff and law offices have less manpower during the holiday season given vacations and such.

Buying a foreclosure? It’s more than just cheap real estate

Delayed evictions cost money

The truth is, Fannie Mae and Freddie Mac have a lot of critics due in part to the huge losses both GSEs have sustained. And these delayed evictions, well, they cost money.

Those who flog Fannie and Freddie for its losses must logically oppose the eviction holiday. Evicted residents are not making mortgage payments. The reality is, the faster a family is evicted the faster the property can potentially be resold.

While the overall odds are fairly good that few families will be evicted during this holiday season, not everyone will be so lucky this year. For some, there will be no eviction holiday because their home loan is part of a mortgage-backed security owned by a variety of investors.

The foreclosures and evictions are handled by a loan servicer, and the servicer must follow the rules laid out in its agreement with the trustee who represents the investors who own the MBS. Such agreements are unlikely to allow for an eviction holiday.

How does Freddie do it?

The Freddie Mac eviction policy applies only to mortgages the company actually owns. In my mind, the real question raised by the eviction holiday is whether evictions are always necessary.

People who have been foreclosed on need to live somewhere. In many cases, they can afford rent but not the monthly cost of a mortgage. No less important, foreclosed homes that wind up in lender inventories do not necessarily sell with great speed–meaning they cost investors a lot of money to keep empty.

Time to rethink evictions

Much like the Occupy movements which have sprouted up nationwide, there is now an Occupy Our Homes movement about to take place. On Dec. 6, there will be a “national day of action to fight back against the housing crisis.”

Lenders have not been especially successful at selling off their inventories of foreclosed homes, despite record low mortgage rates and discounted sales prices. I believe that leaving homes empty as a result of evictions is hardly helpful to lenders or borrowers. Maybe it’s time we rethink our eviction policies. And what better time than this holiday season to do so.

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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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