Fannie Mae Pilot Program Uses Law Firms to Avert Foreclosures

Philadelphia Inquirer (03/24/08); Brubaker, Harold
Victor Medrano, a single-family servicing consultant for Fannie Mae, says up to half of homeowners in the foreclosure process did not contact their mortgage servicer when they began having problems making their monthly payment. Noticing that borrowers appear more willing to contact the law firms handling the foreclosure, the government-sponsored enterprise now permits 39 law firms in 15 states to work out repayment or forbearance plans; they also have permission to lower principal amounts and approve short sales. However, consumer credit counselors note that the law firms must act in the best interest of their client and point out that Fannie Mae pays those firms hundreds of dollars for each repayment plan--which is far less than the $1,300 fee paid when foreclosed properties are sold through sheriff's sales.