The Fannie and Freddie Moratorium... Is This Going to Work?

As I have stated in previous posts, I am not really a fan of moratoriums as a solution to the foreclosure crisis. To me, it's akin to the gas crisis earlier this year - when it was raging, people were terrified of driving their cars, oil company executives were called to the carpet, and the news reported escalating prices on a daily basis. Now that prices have declined sharply, folks are blissfully driving SUVs like nothing ever happened.

The Fannie Mae/Freddie Mac moratorium is set between November 26th and January 9th. The mortgage giants have stated that the delay (remember that word... DELAY) in foreclosure filings throughout the holiday season will pause at least 16,000 evictions and give mortgage servicers time to work out more manageable terms with homeowners.

Will it work?

I am not usually a skeptic. Not only is my nature primarily optimistic, but I am also a homeowners' advocate. I want to believe that this break will truly allow mortgage servicers and homeowners to come together and provide workable solutions for each other. I want there to be an abundance of forbearance agreements. I want for the servicers to switch their call centers from incoming to outgoing and bombard homeowners with phone calls that tout solutions and creative options that homeowners had not yet applied to their situations.

I don't think that will happen. I think the delay will be a breather for homeowners, who will unfortunately turn their attention to the never-ending advertisements for holiday sales and bargains. I don't think servicers will do enough regarding outreach and education, and on January 9th, the panic begins again. With recent reports of unemployment numbers skyrocketing, and with the lack of interest the Treasury department seems to be displaying about the foreclosure issue, I do not think much will be done during this period.

However, I hope this moratorium serves as a lesson to federal, state, and local governments who are considering the same. It will be crucial to look at this test to see what the results were and what could have been done differently. I am always a fan of increased outreach and education - will that one small component make a difference in the number of foreclosures after the moratorium is lifted?

Federal, state, and local governments should be watching this process very carefully. It could serve as a fantastic cautionary tale.