The State of Massachusetts has filed a lawsuit against government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, accusing them of blocking foreclosure buyback programs set up by the state to help distressed borrowers stay in their homes.
Such buyback programs allow non-profits to purchase foreclosed properties and sell them back to the owner at a more affordable price. Typically, principal is reduced on loans where the borrower was once underwater on the mortgage.
The lawsuit alleges that the GSEs have failed to comply with the state law because they have policies in place that prohibit property sales to nonprofits that resell to the original homeowner, according to a Reuters report.
Massachusetts passed a law in 2012 prohibiting creditors from blocking such programs.
‘It makes no sense for our federal government to stand in the way of this work to help struggling families stay in their homes, and it is illegal for Fannie and Freddie to do this in Massachusetts,’ says Martha Coakley, the state's attorney general, in a press release announcing the suit. ‘For too long, Fannie and Freddie have been roadblocks to progress in addressing this foreclosure crisis, and I urge them to immediately reverse their policy on this common-sense program.’
For more, check out the Reuters report, or download a copy of the complaint here.
