Many experts say reducing mortgage principal can help troubled homeowners avoid foreclosure and stay in their homes. But the regulator who oversees two of the nation's largest mortgage holders, Fannie Mae and Freddie Mac, has rejected the idea.
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A federal regulator is blocking the government-owned mortgage giants Fannie Mae and Freddie Mac from reducing the principal that homeowners owe on their mortgages in order to avoid foreclosures.
Tuesday's decision came from Edward DeMarco, the acting director of the Federal Housing Finance Agency.
A foreclosed home in Los Angeles. More than 4 million homeowners nationwide are eligible for an independent review of their foreclosure process, but only a small percentage have applied to the program.
It's been more than six months since government regulators and banks first extended an offer to 4.3 million homeowners facing foreclosure: to review, at no cost, the foreclosure process to check for any possible errors or misrepresentations.
Homeowners stand to collect compensation of as much as $100,000 if errors are found. But thus far, only a tiny percentage of those eligible have signed up.
An abandoned home on Chicago's South Side, which neighbor Ruben DeSantiago says attracts gang activity. DeSantiago and other neighbors mow the lawn and pick up trash because they say no one else is caring for the house.
Like hundreds of cities across the country, Chicago is trying to tackle the issue of too many foreclosed and vacant homes. The city is now requiring lenders to ensure that those abandoned properties are secured and maintained. Other cities have similar laws.
But the federal government is suing Chicago over its new rules in what's seen as a test case that could affect whether any city would be allowed to keep lenders on the hook for abandoned properties.
The latest report from foreclosure monitoring firm Realty Trac shows nationwide, overall foreclosure activity dipped slightly in February. And the trend is similar in Colorado, with foreclosure auctions down by almost 7%.