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Fannie Mae Stepping In to Prevent Strategic Default

June 24, 2010

There has been a lot of hullabaloo lately about homeowners who choose to walk away from their mortgage instead of toughing it out. I am not hear to judge, because I have never been there. I can tell you that any foreclosure has a ripple effect in the community, which has made deals more difficult to close.

One organization that does have a dog in the fight is Fannie Mae and, as of today, they have made their view on the practice crystal clear. Today they announced more severe penalties, read waiting periods, after a foreclosure. Their stated intent is to make options such as loan modification, short sale, or deed-in-lieu of foreclosure much more desirable.

While there will be consideration for homeowners who truly faced extenuating circumstances, defaulting borrowers can now expect to wait 7 years after a foreclosure before being considered for a Fannie Mae loan. This represents a 2 year increase over the previous policy and it is meant to encourage homeowners to work with their servicers to prevent the default.

You can read more in their own announcement.

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