David Ormonde's Homes for Sale

Think twice about voluntarily walking away from your mortgage – Fannie Mae has increased the penalties for borrowers who walk away from their mortgages.  Fannie Mae announced in late June a policy designed to encourage borrowers to work with their servicers and pursue alternatives to foreclosure.  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.  Borrowers who have extenuating circumstances may be eligible for a new loan in a shorter time frame.

Fannie Mae has recognized that walking away from homes is bad for the community.  Neighborhoods that have homes boarded up, or even worse, homes in disrepair and shelters for homeless and drug havens are bad for the neighborhood.  The actions by Fannie Mae are designed to deter this disturbing trend toward strategic defaulting.   The flip side of this deterrent, borrowers 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. 

An added deterrent is Fannie Mae’s ability to take legal action to recoup the outstanding mortgage debt from borrowers who strategically default on their loans in jurisdictions that allow for deficiency judgments.  On the other hand, troubled borrowers who work with their servicers, and provide information to help the servicer assess their situation, can be considered for foreclosure alternatives, HAFA (Home Affordable Foreclosure Alternatives) program offers such help as loan modification, short sale, or deed-in-lieu of foreclosure.  It may be possible for one of these borrowers to be eligible for a new Fannie Mae loan in as little as two to three years, depending on the circumstances.   For more information click here for the complete Fannie Mae Selling Guide, as updated in April 2010.