Fannie Mae to Charge Strategic Defaulters, for Everything
Fannie Mae ($0.00 0%) 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.
Don’t miss out: get HW delivered via email
- Current Chg.
- NASDAQ 3498.97 33.722 ^ixic
- S&P 500 1669.78 3.49 ^gspc
- Volatility Index 13.02 0 ^vix
- KBW Mort. Financial Index 32.84 -0.3 ^mfx
- MSCI US REIT Index 1071.58 8.17 ^rmz
- Checkmate: Jamie Dimon defeats proposal to split his role
- Servicers distributed $50.63 billion through National Mortgage Settlement
- Hardest-hit states record the most relief from servicers
- GSEs remind servicers to revisit disaster relief policies after tornado devastation
- Recovering housing market buoys The Home Depot earnings