Beginning March 1, 2013, Fannie Mae and Freddie Mac will allow homeowners to apply for a deed-in-lieu of foreclosure even if they have been making on-time payments. Until recently, Fannie and Freddie borrowers were only allowed to engage in a deed-in-lieu if they were 90 days or more delinquent. In some cases, homeowners were even encouraged to stop making mortgage payments–even if they could afford them–in order to qualify.

A deed-in-lieu of foreclosure is when a homeowner who can no longer afford their mortgage voluntarily gives back their home to the bank in exchange for having their mortgage debt wiped clean. While a deed-in-lieu of foreclosure will have a negative impact on your credit score, it can be the fastest way to escape an unsustainable situation. Read the rest of this entry »

The post below was written by HSH.com contributing writer Poonkulali Thangavelu. This is Poonka’s first contribution to the blog.

In a bid to follow up on the Federal Housing Finance Agency’s (FHFA) directive to streamline their “deed-in-lieu of foreclosure” program, Fannie Mae has announced some changes–their first being to replace all references of “deed-in-lieu of foreclosure” with “Mortgage Release” program.

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Number of permanent loan modifications: 299,000.

Number of trial modifications canceled:  278,000.

Number of “active trials”: 637,353.

Number of trial modifications started over the last seven months: 660,000.

“That suggests that the HAMP trial period is about 7 months!” writes Calculated Risk (CR), a financial blog. CR’s observation does seem to coincide with the feedback we’ve received from some readers of this blog: the trial portion of the loan mod process is taking far longer than the three-month period it’s designed to last; and more often than not, borrowers aren’t surviving this trial stage.

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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.

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UPDATE1: We thought so, and said just as much last Friday…we just had no idea it would happen this quickly. A short bulletin from National Mortgage News (NMN) this morning reported that the Treasury Department’s Office of Homeownership Preservation (OHP) announced at the Mortgage Banker’s Association’s annual conference that a new wrinkle to the Federal loan modification program is coming soon. Laurie Maggiano of the OHP said the new loan mod effort will be designed to assist borrowers who don’t fit into the current modification mold.

Looking through the latest numbers, we speculated on Friday that it may be time to alter the current structure of loan modifications; according to statistical reports, loan mod issuance has slowed (see original story below), redefault rates are high, and ‘foreclosures in process’ continue to grow.

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