Homeowners win a reprieve
South Carolina's highest court has halted foreclosure auctions around the state at the request of one of the country's largest mortgage financing businesses, buying some homeowners extra time to work out new repayment plans.
Fannie Mae asked the S.C. Supreme Court on Friday to temporarily freeze foreclosures on owner-occupied residences with loans guaranteed by either Fannie Mae or Freddie Mac. Together, the government-controlled entities own or guarantee more than half of all U.S. home loans.
The injunction appeared to be the nation's first court-ordered foreclosure halt for an entire state.
The moratorium is meant to help struggling homeowners figure out if they qualify for lower mortgage payments under President Barack Obama's federal loan modification program.
It's unclear how many mortgages are eligible for restructuring in South Carolina, though RealtyTrac Inc., a foreclosure listing firm, said that this week's court ruling could affect 5,000 homeowners statewide.
Supreme Court Chief Justice Jean Toal said the ruling will be dissolved after May 15 if the mortgage giant does not provide county court officials who oversee foreclosure sales with a detailed list of affected properties.
"We can't just hold up all judicial sales in South Carolina on the strength of the skimpy petition filed by Fannie Mae," said Toal, who estimated that 1,000 properties were scheduled to be sold this month.
"I did what I felt we had to do ... but they've got to get their act together and do the research that should have been done before this was filed."
Foreclosure will continue for borrowers who are found to be ineligible for lower payments.
Fannie Mae spokesman Brian Faith said in an e-mail that the company had to seek a special sweeping order in South Carolina because of the unique way foreclosures are handled in the state.
Without one, local judges could require the company to pay to refile cases on homes that don't qualify for loan modifications once the moratorium expires.
Dave Whitener, a real estate lawyer and adjunct professor at the University of South Carolina School of Law, said he had never heard of judges using that rule, and that it doesn't make logical sense since it would add extra work.
The temporary pause in foreclosures likely will come as a relief to homeowners who are waiting to learn if they are eligible for lower payments, said Toby Smith, a foreclosure counselor at Family Services Inc. in North Charleston.
"It's critical because one of the challenges we've had is that there are so many people in the pipeline waiting to hear anything at all, and they run the real risk of not getting the opportunity to participate in the program," she said.
"This is going to give more time to people to have their files really evaluated."
The ruling came the same week as local court officials were preparing to hold their monthly foreclosure sales.
Gail Evans, a clerk in the Dorchester County master-in-equity's office, said she was so busy Monday getting ready for Tuesday's auction that she didn't see a message about the Supreme Court order. She found out about the changes later through an attorney's office.
A total of 35 Dorchester County properties were scheduled to go on the block Tuesday morning. Judge Patrick Watts, not knowing which properties had ties to Freddie or Fannie, cut the list to four "special case" properties.
Charleston County was set to sell 28 foreclosed properties Tuesday morning but scaled back its courthouse auction to two properties with unique situations. Berkeley County officials canceled its sale of about 50 properties scheduled for today.
The court order includes a provision that would allow some auctions to proceed if attorneys file an affidavit stating that specific properties are exempt.
Does Fannie Mae or Freddie Mac own your mortgage? Both companies have Web sites where homeowners can check by typing in their addresses.
Fannie Mae: loanlookup.fanniemae.com/loanlookup
Freddie Mac: www.freddiemac.com/mymortgage
For more information about the Obama administration's loan modification program, visit www.financialstability.gov. To speak with a foreclosure counseling agency that's approved by the U.S. Department of Housing and Urban Development, call 888-320-0350. The service is free.