As I wrote back in March, “Walking away” from your mortgage? Maybe think twice, contrary to popular belief it’s already impossible to “walk away” from your home unscathed and there are plenty of reasons not to. However today government-sponsored mortgage giant Fannie Mae announced a new policy designed to encourage borrowers to work with their current lender and pursue alternatives to foreclosure, giving homeowners even more incentive not to “walk away” from their home and mortgage.
Under the new rule: “Defaulting borrowers who walk-away and had the capacity to pay or did not complete a workout alternative in good faith will be ineligible for a new Fannie Mae-backed mortgage loan for a period of seven years from the date of foreclosure.” Fannie Mae backs the vast majority of non-government loans (FHA, VA, USDA, etc) so this might be a big factor to a lot of people. As of right now it is possible for buyers to get a new Fannie Mae loan in as little as 2-3 years after a foreclosure, this rule more than doubles that time IF the homeowner/buyer falls under their new “walking away” rule.
“We’re taking these steps to highlight the importance of working with your servicer,” said Terence Edwards, executive vice president for Fannie Mae’s 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.”
Due to the econpomy and current real estate climate they have not been going after those that choose to walk from their mortgage obligation over the 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.
Let me know if you have any questions..