When talking with some people about Short Sales, sometimes they say, “I’ll just leave the keys on the table.” Other times they may not know their options and just think that their only “choice” is a foreclosure. We’ve talked about short sale vs foreclosure before and how short sales are almost always better than another option aside from selling it outright or keeping the home.
Foreclosure just became a worse “option” when Fannie announced:
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.
This is a huge deal, since most of the purchases are resold to Fannie Mae.
“We’re taking these steps to highlight the importance of working with your servicer,” said Terence Edwards, executive vice president for credit portfolio management. “Walking away from a mortgage is bad for borrowers and bad for communities and our approach is meant to deter the disturbing trend toward strategic defaulting. On the flip side, borrowers facing hardship 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.”
Foreclosure gets even worse…
They also announced legal action against borrowers who strategically default:
In an announcement next month, the company will be instructing its servicers to monitor delinquent loans facing foreclosure and put forth recommendations for cases that warrant the pursuit of deficiency judgments.