By Ashley Fletcher Frampton
aframpton@scbiznews.com
Published May 5, 2009

The S.C. Supreme Court has issued a temporary restraining order on some foreclosure sales to give homeowners eligible for a federal loan modification program the opportunity to participate.

Chief Justice Jean Toal issued the order at 4:50 p.m. Monday at the request of the Federal National Mortgage Association, better known as Fannie Mae.

In a petition filed Friday, Fannie Mae asked the court to prevent judges in South Carolina from selling foreclosed owner-occupied one- to four-unit properties with mortgage loans backed by Fannie Mae. The petition asked for a halt of up to 90 days for sales scheduled for this week.

Fannie Mae sought the temporary injunction so it could implement the Obama administration’s Home Affordable Modification Program, which lowers monthly mortgage payments for eligible homeowners.

Obama announced the program Feb. 18, and the U.S. Treasury Department issued guidelines for implementation on April 6. All Fannie Mae-approved servicers must participate in the program for eligible loans.

Without the restraining order, Fannie Mae argued, homeowners eligible for the program whose homes were sold through foreclosure proceedings would miss out on the chance to participate.

“This qualifies as irreparable injury for which the court should provide redress in the form of a temporary injunction,” the petition said.

Fannie Mae did not have time to seek relief in lower courts, the petition to the S.C. Supreme Court said.

Officials with Fannie Mae and the company’s attorneys in Columbia could not be reached today for comment.

It’s unclear whether similar Fannie Mae is pursuing similar restraining orders in other states.

In the order, Toal granted a temporary restraining order preventing the foreclosure sale of any property with a loan owned or guaranteed by Fannie Mae or Freddie Mac or held by a servicer that signed an agreement to participate in the Home Affordable Modification Program.

Many counties in South Carolina hold foreclosure sales on the first Monday of the month. Toal’s order stays any sales that took place Monday from moving ahead.

By May 15, the plaintiff in every mortgage foreclosure action stayed by the order must serve all parties an affidavit stating whether the loan can be modified under the new federal program, Toal’s order said.

Mortgages that qualify remain under the injunction. Mortgages that don’t qualify or are not modified can continue in the foreclosure process.

Dorchester County had a foreclosure sale scheduled for today. Gail Evans, assistant to the master-in-equity, said the county stopped the sale of most residential properties to ensure it did not violate the Supreme Court’s order.