Fannie Locks Out Strategic Defaulters

Posted by Orb Staff on June 24, 2010 No Comments
Categories : Mortgage Servicing

gic defaulters will have to wait at least seven years after the date of their foreclosure before obtaining a Fannie Mae-backed mortgage loan, the government-sponsored enterprise has announced. Fannie's new ‘lockout’ policy refers to defaulting borrowers who walk away and had the capacity to pay or did not complete a workout alternative in good faith. ‘We're taking these steps to highlight the importance of working with your servicer,’ says Terence Edwards, Fannie Mae's executive vice president for credit portfolio management. ‘Walking away from a mortgage is bad for borrowers and bad for communities, and our approach is meant to deter the disturbing trend toward strategic defaulting. On the flip side, borrowers facing hardship who make a good-faith effort to resolve their situation with their servicer will preserve the option to be considered for a future Fannie Mae loan in a shorter period of time.’ Fannie Mae will also take legal action to recoup the outstanding mortgage debt from borrowers who strategically default on their loans in jurisdictions that allow for deficiency judgments. In an announcement next month, the company will be instructing its servicers to monitor delinquent loans facing foreclosure and put forth recommendations for cases that warrant the pursuit of deficiency judgments. Troubled borrowers who work with their servicers can be considered for foreclosure alternatives, such as a loan modification, a short sale, or a deed-in-lieu of foreclosure. A borrower with extenuating circumstances who works out one of these options with their servicer could be eligible for a new mortgage loan in three years and in as little as two years, depending on the circumstances. These policy changes were announced in April, in Fannie Mae's Selling Guide Announcement SEL-2010-05. SOURCE: [link=http://fanniemae.com/newsreleases/2010/5071.jhtml]Fannie Mae

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