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Fannie and Freddie announce mortgage help but foreclosures continue to soar

Fannie Mae and Freddie Mac announced that the temporary hiatus on foreclosures will run from November 26 until January 9, 2009, and it hopes it will give troubled property owners time to work out easier borrowing terms.

The announcement comes at time when the latest figures show that foreclosures are continuing to rise and reaching new highs with some believing they are out of control.

'We felt it was in the best interest of both borrowers and Fannie Mae to take this extra step to ensure that homeowners with the desire and ability to prevent a foreclosure have an opportunity to stay in their homes,' Herb Allison, Fannie Mae's chief executive officer.

But critics say that rather than stemming the increase in foreclosures it will just put off the worst. 'I don't think it helps. Falling property prices give homeowners incentives to walk away to it could just put off the inevitable,' said Walter Schmidt, head of mortgage strategy at FTN Financial Capital Markets in Chicago.

The move by the two government-sponsored enterprises comes a week after their regulator unveiled a plan that could cut payments for hundreds of thousands of borrowers by easing terms on their loans. Homeowners facing foreclosure who are spending more than 38% of their income on mortgage payments could have payments reduced by the companies, under the programme.

However so far loan modifications by lenders, which have increased, have failed to stop record increases in foreclosures.

Foreclosure filings, that is default notices, auction sale notices and bank repossessions, have increased by 5% in October, according to the most up to date figures from foreclosure listings provider RealtyTrac. That amounts to a 25% increase from October 2007 and is the 34th month in a row where foreclosure activity has increased.

California tops the foreclosure table followed by Florida, Arizona and Nevada while Las Vegas is the city with most foreclosures.