Fannie Mae (FNM: 0.00 N/A) is sifting through borrower data to determine who is strategically defaulting and who is not after announcing more efforts this week to crack down on those who walk away from their homes. And if the GSE determines someone strategically defaulted, then they say they will hold the borrower accountable for all associated costs of getting the house back on the market, in areas that lawfully allow deficiency judgments.

Often when a home forecloses, Fannie Mae brokers and contractors discover vandalism and missing appliances and fixtures when they ready the home for resale, the GSE said. The cost of making those repairs and replacements will be included in the determination of the deficiency amount, a Fannie Mae spokesperson said, in addition to the difference in the mortgage balance and the proceeds from the foreclosure sale.

Those who Fannie Mae and its servicers deem strategically defaulted will not be able to secure a Fannie Mae-backed mortgage for seven years after the foreclosure and could face legal action in order for the company to recoup mortgage debt.

Fannie will base its assessment of who is and who isn’t walking away from their home on income verification, information on the borrower’s credit report, and borrower documentation related to the disposition of prior mortgage loans, the spokesperson for Fannie said.

When a borrower applies again for a Fannie Mae-backed mortgage, he or she would have to produce evidence of hardship or extenuating circumstances to get the loan.

“Borrowers who worked with their servicers to address delinquency and/or avoid foreclosure, will be viewed more favorably than those who do not,” the spokesperson said.

According to the announcement this week, Fannie is instructing its servicers to monitor delinquent loans on the verge of foreclosure and recommend cases where the company can pursue deficiency judgments.

Write to Jon Prior.

The author held no relevant investments.

The sweeping financial regulatory reform bill agreed to this morning includes a provision sought by U.S. Rep. Chaka Fattah (D-PA) to help unemployed homeowners facing foreclosure.

A conference of House representatives and senators agreed early this morning on the financial reform bill after weeks of debate. It must still go to a full House and Senate vote but is expected to reach President Obama’s desk for a signature by July 4.

The provision provides $1bn to unemployed homeowners and is patterned after a program introduced by Fattah when he was a Pennsylvania state legislator. Pennsylvania's Homeowner's Emergency Mortgage Assistance Program (HEMAP) has provided $236m to tens of thousands of unemployed workers to stave off the foreclosure, according to Fattah’s office. Fattah had originally sought $3bn for the federal reform bill provision.

A spokesman in Fattah’s office said they are still awaiting final word from the House-Senate committee on how the provision would be funded. There were discussions last year about using untapped Troubled Asset and Relief Program (TARP) monies as the funding mechanism.

Under the program, qualified homeowners will be able to borrow up to $50,000 to assist them with their mortgage payments, provided that they have a reasonable prospect of resuming mortgage payments within 24 months.

"This funding will help so many Philadelphians and homeowners across the country who risk losing their homes after falling on hard times through no fault of their own,” said Philadelphia Mayor Michael A. Nutter in a prepared statement.

Write to Kerry Curry

After announcing this week that it intends to crack down on strategic defaulters, Fannie Mae (FNM: 0.00 N/A) issued a servicing guide (download here) Friday implementing another new policy — requiring servicers to verify income, liabilities, and monthly expenses for all borrowers prior to granting a permanent standard Fannie Mae mortgage modification.

Previously, servicers were allowed to evaluate borrowers for standard mortgage modifications using stated information from the borrower.

Now, the servicer must not agree to change the terms of a mortgage until it verifies the borrower has a hardship, determines that a permanent standard Fannie Mae mortgage modification is the appropriate foreclosure prevention alternative and obtains Fannie Mae’s prior written approval, the guideline said.

Items that must be verified include salary and other income with paystubs or benefits checks, bills and a credit report.

If a borrower that receives a Fannie Mae modification becomes 60 or more days delinquent within the first year after the effective date of the modification, the new policy requires servicers to "immediately" work with the borrower to pursue either a preforeclosure sale or deed-in-lieu of foreclosure, or commence foreclosure proceedings, in accordance with applicable state law. If the servicer determines another modification is appropriate for the borrower, the servicer must first obtain Fannie Mae's prior written approval.

With as many as 1/3 of all mortgage defaults occurring by borrowers strategically deciding to walk away, Fannie Mae announced a plan to crack down on strategic defaulters with a policy announced Wednesday that prevents strategic defaulters from getting another Fannie Mae-backed mortgage for seven years.

Fannie Mae will also take legal action against borrowers who strategically default in order to recoup mortgage debt. These would be limited to locations that allow deficiency judgments.

Write to Austin Kilgore.

The author held no relevant investments.