Fannie Mae and Freddie Mac were warned by Massachusetts Attorney General Martha Coakley to comply with a new state law aimed at reducing foreclosures by requiring mortgage loan modifications.
The companies must offer “commercially reasonable” changes under legislation signed into law Aug. 3 by Governor Deval Patrick, Coakley’s office said today in a statement.
“We expect Fannie Mae and Freddie Mac, like all creditors, to comply with these statutory obligations,” Coakley said in a letter to the Federal Housing Finance Agency. “We expect that Fannie Mae and Freddie Mac will pursue common-sense loan modifications for borrowers when the economic benefits of a modified loan exceed the significant losses anticipated at foreclosure.”
Under the law, creditors must modify certain loans when the value of the modified loan is greater than the anticipated recovery from a foreclosure. They must also show they are the legal mortgage-holders when foreclosing on homes.
Coakley also urged the FHFA, which regulates Fannie Mae and Freddie Mac, to reduce loan principal balances for struggling homeowners.
A spokeswoman for the FHFA, Stefanie Johnson, declined to comment immediately on the attorney general’s letter.
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