Fed steps in to help prevent foreclosures

01.29.09
By Timothy Jones

Another step has been taken to try and help millions of U.S. families avoid foreclosure and stay in their homes.

The Federal Reserve announced on Tuesday that it will modify the terms on delinquent home loans that are part of the residential mortgage securities it holds on its books.

The plan would assist homeowners who are at least 60 days late in payments by reducing the interest rate, extending the loan term and either deferring or lowering the principal.

However, the Associated Press points out that borrowers are not likely to be aware of whether their home loan is held by the Fed, since payments are collected by separate companies called loan servicers.

Plus, it is estimated that the Fed owns, holds or controls only a modest proportion of the total value of the country's risky home loans - so there are questions about how many borrowers the measure will actually help.

"It's a small step forward," Jim Carr of consumer group National Community Reinvestment Coalition told the news provider. "If the goal is to stem the foreclosure crisis, this won't do it."

President Obama has said he plans to use a significant proportion of the next wave of bailout money to try to stem foreclosures.

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Millions of American families face foreclosure