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Democrats seek to halt foreclosures

September 12, 2008|From the Associated Press

WASHINGTON — Four Democratic senators Thursday urged mortgage companies Fannie Mae and Freddie Mac to temporarily freeze foreclosures on loans they hold.

The troubled companies, seized by the federal government Sunday, should help struggling borrowers swap their mortgages for more affordable loans and stay in their homes, the lawmakers said in a letter to the new chief executives and federal regulator running Fannie Mae and Freddie Mac. It was the latest sign of mounting congressional pressure on James Lockhart, the director of the Federal Housing Finance Agency, to ensure that the companies use their clout in the mortgage market to help homeowners caught in the housing crisis.

The senators -- Sherrod Brown of Ohio, Bob Casey of Pennsylvania, Robert Menendez of New Jersey and Charles E. Schumer of New York -- wrote that the companies should "take whatever actions are necessary" so more families "do not have to suffer the economic and personal disaster of foreclosure."

The firms hold or guarantee about $5 trillion in outstanding mortgages, more than half the nation's total. The foreclosure freeze, which the lawmakers said should last at least 90 days, would not apply to all those loans.

Meanwhile, the Treasury Department released a statement Thursday aimed at reassuring investors that the government's pledge to invest up to $200 billion in Fannie Mae and Freddie Mac was solid.

While some may speculate a future Congress might overturn that commitment, such actions would be inconsistent with the government's history of honoring its obligations, the Treasury Department said.

"The U.S. government stands behind the preferred stock purchase agreements and will honor its commitments," the Treasury Department document said, adding that the government "deliberately chose a large number to give confidence to the markets."

The Bush administration seized control of the companies in a bid to help reverse a prolonged housing and credit crisis. Fannie and Freddie now are under a conservatorship that ultimately could cost taxpayers billions of dollars.

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