Fannie Mae updated a handful of its policies regarding significant derogatory credit events, allowing more borrowers to jump back into the housing market.
1. Mortgage debt waiting period
The borrower is now held to the bankruptcy waiting period and not the foreclosure waiting period. This is true even if a foreclosure action is subsequently completed to reclaim the property in satisfaction of the debt.
2. Preforeclosure Sale or Deed-in-Lieu of Foreclosure waiting period
The waiting periods are being updated to remove the LTV restrictions tied to different waiting periods and establish a standard 4-year waiting period, with a 2-year waiting period permitted if a borrower has extenuating circumstances.
3. Mortgage debt
As a new policy, charge-offs of mortgage accounts now require a 4-year waiting period following this derogatory credit (2 years if the borrower can demonstrate extenuating circumstances). Additionally, the existing charge-off policy in the Selling guide has been relabeled as “non-mortgage charge-offs” to clearly differentiate the two policies.
The first one is effective immediately, while the second and third are effective for mortgage loans with applications dated on and after Aug. 16.