Strategic Defaults Not Such a Great Idea – Fannie Mae Getting Tough

Strategic Defaults Not Such a Great Idea Fannie Mae Getting Tough

Homeowners who walk away from their homes and default on their mortgages even though they can afford to make payments without trying alternatives to foreclosure may find they are unable to get a Fannie Mae backed loan for 7 years.

Some homeowners in neighborhoods affected by high rates of distressed homes are opting to strategically "walk away" from their homes due to the falling values.

Freddie Mac already has a 5 year wait period in place but a spokesman says this government backed agency will take a closer look at their policy.

Walking away from a mortgage without a good faith attempt to re-finance, apply to the HAMP or HAFA programs or sell with a short sale is bad for the community, destabilizing home values and brings down community quality. It's also bad for the the government as both companies have been taken over by the government since September 2008. The government controlled companies have so far cost the taxpayers $145 billion. And the financial health of both continues to decline. Falling stock prices for Fannie Mae and Freddie Mac have resulted in a value below $1 which is the minimum required to stay listed with the New York Stock Exchange. Do we foresee another bailout?

Fannie Mae recently made the headlines when they announced they would assist homeowners affected by the gulf oil spill by suspending or reducing mortgage payments for up to 90 days while the loan servicer evaluates the impact of the gulf crisis. This is all well and good but the enormous task of managing this process could follow suit with the already bogged down system for modifying under-water loans. Let's hope servicers are prepared to handle the flood of requests for help.

Also this month, Fannie Mae announced the homeowners affected by drywall problems may qualify for up to 6 months of forbearance on mortgage payments.

Servicers will have to evaluate on a case-by-case basis and require an inspection.

This program falls under Fannie Mae's "Unusual Hardships" policy that goes into effect in July 2010.

Fannie Mae also has Fannie Mae Tenant-in-Place Rental Policy for renters affected by a foreclosure on a property they are renting. If qualified a renter may sign a month-to-month lease. This program is helping to stabilize neighborhoods affected by high foreclosure rates. Renters may also be eligible for financial assistance if they desire to relocate.

Fannie Mae's Deed-for-Lease Program allows qualified borrowers (or their tenants) to execute a lease of up to 12 months in conjunction with their deed-in-lieu of foreclosure, allowing them to remain in their home as a renter. Borrowers interested in exploring this option should discuss it with their mortgage servicer. To qualify both the property and borrower (or tenant of the borrower) must meet certain general qualifications.

Consumer education is the focus of the information provided here and on the blog www.RealEstateExpertsFlorida.com. Visit for current and reliable information for consumers, sellers, and buyers and other real estate professional.

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