Borrows who Walk Away from Mortgages May Face 7 Years of Credit Impact
Yesterday there was an announcement by Fannie Mae that they were going to extend the penalties for borrows who walk away from their loan obligations. In the announcement, you can read that if Fannie Mae determines that a borrower walked away when they had the ability to pay, they will be ineligible for Fannie Mae Loan for a period of 7 years.
In addition, Fannie Mae is putting in place policies to monitor and then pursue borrows who are in default. This was stated in the announcement – “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.”
So what option does an owner who needs to sell but can’t have? They are going to think long and hard about the ramifications of their decisions. If they can work with their mortgage holders through a loan modification, a short sale, or even deed-in-lieu, they may be able to reduce the time down to three years instead of seven.
The question then becomes how does Fannie Mae determine who has the capacity to pay? It will be interesting to see how this plays out in the marketplace over the next couple of years. I would be interested to know your thoughts on this new development and how you think it will impact the current housing crises, so add a comment and I will publish them.
To read the full announcement, you can go to Fannie Mae’s site.
July 2nd, 2010 at 9:07 pm
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July 7th, 2010 at 10:51 am
I mean, unemployment has to be taken into account, doesn’t it? Credit card debt should also be considered.
July 20th, 2010 at 9:37 am
The two mortgage giants are critical to America’s ability to purchase homes – I’m curious as to how long this process of re-evaluation of past borrowers will take, considering we will not likely see a market pickup until it’s over and the two can, once again, begin lending and repackaging mortgages…
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