Fannie and Freddie and JP and Stanley and...

Good news on the housing front:

Government-controlled mortgage finance companies Fannie Mae and Freddie Mac said Friday they have immediately suspended all foreclosure sales involving occupied single-family and 2-4 unit properties through March 6. This is to give troubled borrowers more time to work with loan servicers to avoid losing their homes.
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Meanwhile, Citigroup, JPMorgan Chase and Morgan Stanley said they had placed a moratorium on foreclosing on some home loans to give the government time to launch a $50 billion mortgage relief program. (Soure: CNBC)

As far as I can interpret this, this is a sort-of-kind-of thumbs up from the major banks to the Obama plan to restructure troubled mortgages and subsidize homeowners who are underwater. At the moment, no bank wants default on a massive scale and no bank wants to seize property only to have to sell it into a trouble market (see my previous post). But now that Obama's plan is seen as a kind of inevitability, the Banks may be holding off, assuming that Obama's plan is going to make such widescale foreclosure activity unnecessary. That's my take on it anyway, but I'm honestly not that sure.

The move may be partly political as well:

"I've talked to all the major servicers—both the big bank ones and the big independent ones—and they are all ready to go, they're chomping at the bit,'' Lockhart, the director of the Federal Housing Finance Agency, said. "The other thing they're asking for standardization.''

On top of that, following Fannie and Fredie's lead by temporarily suspending foreclosures and working with the administration probably generates some profitable good will. If the banks are going to be forced into taking a haircut in the near future, maybe they all want to make sure that each one is coming out equally mutilated.

As for the eventual success of that particular aspect of the Obama/Geithner plan, not everyone is so optimistic:

Another "evolving plan". I think they will discover that there is no easy method for successful loan modifications (as FDIC Chairwoman Sheila Bair discovered when they took over IndyMac). I guess the plan is to buy down loans with the $50 billion - or pay a portion of the monthly payment.

The details will be interesting. I'm curious - how do you measure success when the borrowers aren't already in default? (Source: Calculated Risk)

We'll have to wait and see.