Strategic Default: No New Mortgage for 7 Years!by Tim Manni
A while back one of our dedicated readers told me she couldn’t understand why the mortgage industry wasn’t doing more to persuade borrowers from strategically defaulting (when a borrowers who can afford their monthly payments defaults on purpose). As of yesterday, the biggest player in the American mortgage market took action.
Fannie Mae announced that they plan to “lockout” borrowers for seven years who have strategically defaulted — a.k.a “walked away” — from their mortgage:
The new policy will get rid of the five-year waiting period for all borrowers who go into foreclosure. Instead, the waiting period will stretch to seven years for borrowers who can’t demonstrate that they faced “extenuating circumstances” when they went into foreclosure or that can’t document an effort to get a workout from their lender. For borrowers who can show “extenuating circumstances” or that they tried to get a loan workout, the waiting period could be reduced to three years.
Keep your documentation for…years
The fact that Fannie could be locking out borrowers for an additional four years if they can’t present or prove “extenuating circumstances” or that they didn’t first try to workout a deal with their lender means that borrowers need to keep careful records, and keep those records for years and years.
We have read countless comments from borrowers who, for one reason or another, haven’t qualified for a loan mod. Many of these borrowers have made several phone calls, sent in several sets of paperwork, and still nothing.
For those of you out there who have tried or are trying to get a loan mod, we offer this very essential advice:
-Document every phone call with times, duration of your conversation, the names of whom you spoke with and what information they told you. We strongly suggest you follow up these conversations with written correspondence (with receipts of delivery).
-Make copies of all the paperwork you send to your servicer, the dates you sent them and how long it took for them to get back to you, if at all.
-Finally, keep all this documentation in a safe and accessible place for seven years (at least) — your next mortgage might depend on it.