Fannie: Buying Another Home Is Easier If You Don’t Walk Awayby Tim Manni
About a month ago, one of our readers emailed me and asked why the mortgage industry wasn’t making things easier for borrowers who didn’t walk away from their mortgages. Angry over the fact that borrowers were walking away from their responsibilities, furthering the problems that have contributed to the housing downturn — “Walking away only because you are underwater is only going to further the problem” — our reader suggested, “If we can arm the people that will continue to pay with some ammunition, maybe they can help.”
A recent announcement by Fannie Mae is step in that very direction. On applications submitted after July 1, 2010, borrowers who lost their homes via a short sale will only have to wait two years before they can apply for another Fannie-backed mortgage. Previously, borrowers had to wait at least four years.
From National Mortgage News:
Credit experts called the change an acknowledgement that borrowers who work with their lenders are better risks than those who simply mail in the keys.
“It makes sense to be a little bit kinder to borrowers who have made an effort to do something about the loan and did not just walk away and say it was the lender’s fault,” said John Ulzheimer, the president of consumer education at Credit.com Inc., a lead generator. “Someone who fights to complete a short sale is likely to be a continuing strong credit risk going forward if they are not saddled by a disadvantaged mortgage.”
While this may seem to some like just another reward for borrowers who have failed to stay current on their home loans, “the change is not a giveaway,” writes Kate Berry of NMN. If borrowers want to take advantage of the new two-year window, they must put at least 20% down. If a borrower can only put 10% down, the four-year waiting period still applies.
Fannie’s announcement comes about two weeks after Washington’s Home Affordable Foreclosure Alternatives (HAFA) program began. According to MakingHomeAffordable.gov, the way HAFA works is it “offers homeowners, their mortgage servicers, and investors an incentive for completing a short sale or deed-in-lieu of foreclosure. With these options, under HAFA, a homeowner leaves their home to transition to more affordable housing and alleviate the mortgage debt they owe.”
The goal of HAFA is also to streamline the short sale process and to lessen the impact that a short sale can have on your credit.
Readers: Do you view Fannie’s change in policy as just another “gift” for borrowers, or more as a meaningful way to discourage strategic defaults by underwater borrowers?