Fannie Mae's Policy Changes, Possible Ramifications for those who Walk Away

By
Real Estate Agent with Keller Williams Premier

Fannie Mae's policy changes have several goals:

1. First encourage homeowners to work with their lender to pursue alternatives to foreclosure.

Such as loan modification, a short sale, or a deed-in-lieu of foreclosure.

2. Homeowners who walk away and had the capacity to pay or did not work out alternatives may not be ineligible for new Fannie Mae-backed loans for a period of up to seven years.

Borrowers who made a good faith effort to resolve their situation with their lender may be considered for a future Fannie Mae loan in a shorter period of time, depending on "extenuating circumstances" such as a major medical illness. Here are two examples:

- Borrower A

worked with their lender in good faith and completed a deed-in-lieu of foreclosure or a short sale/pre-foreclosure sale.After 2 years: He may be eligible for financing with a minimum of 20% down, subject to additional requirements such as a minimum FICO score.After 4 years: She may be eligible for financing with a minimum of 10% down, subject to credit score minimums and other requirements. After 7 years: He is eligible for financing with standard minimum down payments in place at that time, subject to credit score minimums and other requirements.

- Borrower B

did not work with his lender and his home was foreclosed. He must wait a minimum of 7 years before being considered for financing.

3. To allow legal action to recoup outstanding mortgage debt from homeowners who "strategically default" on loans

(in jurisdictions that allow for deficiency judgments). Like if the home was an investment home.

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