Hard economic times call for strong relief, and that is just what mortgage finance companies Fannie Mae and Freddie Mac brought for the holiday season – relief from foreclosures.  At the end of November, Fannie and Freddie announced they would suspend foreclosure sales during the holiday season, ending today, January 9th. Meanwhile, the two companies said, they would evaluate whether those borrowers qualify for their new loan modification program, which applies to homeowners who’ve fallen at least three months behind on payments. The two mortgage giants announced Thursday that they’re extending the suspension through the end of this month.

Back in September (see Senators Seek Freeze On Foreclosures), I explained that FNMA and FMAC have power to defer foreclosure or offer modifications only on their own loans and on loans they guarantee, but that these two institutions account for well over 50% of the residential mortgages in the country.  Under their “streamlined modification plan” begun in December, homeowners who are spending more than 38% of income on mortgage payments could qualify to have those payments reduced.

One of the questions I’m asked most frequently is whether a foreclosure of a mortgage is inevitable in bankruptcy, and the answer is not all all.  Chapter 13 bankruptcy, for example, is often selected precisely in order to save a home from foreclosure.

A holiday of a different sort will affect seniors with IRAs.  President Bush signed H.R.7327 into law in December, suspending the IRS tax penalty that would have applied to seniors older than 70 1/2 for failing to take withdrawals from their retirement accounts in 2009. Since many of these retirement accounts have lost significant value, seniors who are able to hold off using the money will not be forced to make taxable withdrawals.