Democrats call for foreclosure freeze

Friday, September 12, 2008 11:01 AM PDT

WASHINGTON(AP) — Four Democratic senators urged the mortgage companies Fannie Mae and Freddie Mac on Thursday to temporarily freeze foreclosures on loans they hold.The troubled companies, seized by the government Sunday, should help struggling borrowers swap their mortgages for more affordable loans and stay in their homes, the lawmakers wrote the new chief executives and federal regulator now 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, Bob Menendez of New Jersey and Charles 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 some $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 pass a law overturning that commitment, such a law would be inconsistent with the U.S. government’s long-standing history of honoring its obligations, Treasury said.

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

The administration ousted Fannie Mac chief executive Daniel Mudd and Freddie Mac CEO Richard Syron and replaced them with Herb Allison, a former vice chairman of Merrill Lynch, and David Moffett, a former vice chairman of U.S. Bancorp, respectively.

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