Fannie Mae Updates Delinquent Borrower Policy
Posted by Benjamin Dona on Tuesday, April 20th, 2010 at 5:58pm.
In an effort to support stability in the housing market, Fannie Mae is updating its policies regarding the future eligibility of borrowers after they have experienced a Pre-Foreclosure Event - a pre-foreclosure sale or deed-in-lieu of foreclosure. Basically they are adjusting their underwriting guidelines to try and shorten the time it takes for delinquent borrowers to recover mortgage eligibility after losing their homes.
Here's a synopsis of the changes:
- The "waiting period" time that must elapse after a Pre-Foreclosure Event is changing and will be dependent on the LTV ratio for the new transaction. The waiting period will commence starting on the completion date of the pre-foreclosure sale or deed-in-lieu of foreclosure.
- The changes will become effective for loan applications submitted on or after July 1st, 2010.
- The waiting period will be two years for mortgage eligibility to obtain a 80% maximum LTV ratio and four years for a 90% maximum LTV ratio.
- If there are documented extenuating circumstances (hardships) for the Pre-Foreclosure Event, the "waiting period" will be two years with a 90% maximum LTV ratio.
- Additional re-establishment of credit parameters and minimum credit score criteria will also apply.
As with everything Fannie Mae proposes, it will be up to the individual lenders to decide how they will or will not participate under these new guidelines. It will be interesting to see how they respond to the changes.
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