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Freddie and Fannie announce new help for struggling US property owners

Freddie Mac and Fannie Mae, both of which were nationalized last September, are now more or less obliged to help struggling homeowners.

They have already put a moratorium on foreclosures which is now being extended beyond the original deadline and this month they are introducing schemes that will allow borrowers to rent their homes after default.

The programme is also designed to help tenants whose landlords go into default. Until now they would have been forced out of their homes.

However critics say that the programme while expected to help tens of thousands of people is only a drop in the ocean.

'This is going to soften the impact of evictions on all occupants, particularly renters who had no idea that their home was going into foreclosure,' said Brad German, a Freddie Mac spokesman.

In January, Fannie suspended about 20,000 foreclosures and 6300 evictions by owners or renters, the company said. It will now expand rental options after default and a new rent-to-own mortgage programme,' said spokesman Brian Faith.

Both companies have extended their suspensions of evictions of borrowers or renters due to foreclosure to the end of February. They also hope that it will help the property market to recover as keeping foreclosed properties occupied and in better repair will support local property values and promote a faster recovery in prices.

Dean Baker, co-director of the Center for Economic and Policy Research, praised the moves. 'It is a way to give help without spending a huge amount of taxpayer money and it does not create a motivation for a borrower to default,' he said.

Credit Suisse in December has estimated that 8.1 million, or 16% of all mortgages, would be in foreclosure over the next four years without more lender or government interventions.

Critics point out the Freddie Mac has only about 8,500 properties in foreclosure and many of these are already empty.