BP, Freddie Mac, and Mortgage Relief (FRE, FNM, BP, C)

Freddie Mac (NYSE: FRE) and Fannie Mae (NYSE: FNM) are two companies with an unlikely tie to the BP plc (NYSE: BP) oil spill catastrophe in the Gulf.  But after a $20 billion fund promise yesterday from BP management. Freddie Mac has just joined in with mortgage relief in the Gulf region for people affected by the BP spill in a move similar to one done by Citigroup Inc. (NYSE: C).

Despite the notion that Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) are being delisted from the NYSE along with their multiple preferred share listings, the companies will continue to operate under government conservatorship.

Freddie Mac said that servicers may grant relief to Gulf Coast borrowers unable to pay their loans because of the oil spill’s impact on their incomes. Its forbearance policies give servicers the discretion to suspend a borrower’s mortgage payments for up to three months, OR they may reduce payments for up to six months.  To take it a step further, these servicers may recommend forbearance for up to twelve months, based on the borrower’s circumstances.

Freddie’s requirements are that servicers “must not accrue or collect late charges from the borrower during a short-term forbearance or any subsequent repayment plan period if the borrower is paying according to the forbearance agreement.”

Earlier, Citigroup, Inc. (NYSE: C) announced a three-month suspension starting today and going through September 17 of foreclosure sales and notifications and evictions on possessed properties for qualifying borrowers in the Gulf region with first mortgages held by CitiMortgage.

The Freddie & Fannie bailout could cost as much as $1 trillion in figures given earlier this week.  That figure arguably did not include anything new tied to BP’s mess.

At the end of the day, maybe BP will just have to start making large coastal mortgage payments for anyone under water or who is unable to make their mortgage payments whether their income was really tied to the spill or not.

What will be really interesting is to see which banks and mortgage lenders get into the soup over this for failing to comply or which take advantage of the system.

JON C. OGG