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.
Gulf Coast Associates, Realtors
Specializing in upscale Florida Real Estate for Sale
Florida Home Loans | Florida MLS Search
Contact us today at 888-617-3674
3 users commented in " Fannie Mae Updates Delinquent Borrower Policy "
Follow-up RSS Comments Feed or Leave a TrackbackUltimately, unsound underwriting practices led to the financial meltdown. Sure, Fannie Mae has a share of the blame, but so do the consumers who signed for mortgages they couldn’t afford.
This, in my view, is not a bad idea. I think what gets overlooked in many non-FHA loan programs is a common sense approach to risk analysis. For example, in FHA lenders must simply judge a borrower’s overall pattern of credit behavior; and there is NO minimum credit score. Granted you’d be hard pressed to find a lender that didn’t voluntarily impose a credit score requirement. Anyway, this change by Fannie Mae, I think, is more in this same spirit. A lot of people have been hit by economic forces beyond their control. These are the people who will benefit from this.
In a way it’s up to the lenders to participate in any new Fannie or Freddie guidelines and in a way it’s not; at least not unless they want to carry their own paper. I guess there’s always FHA.
Leave a Comment for Fannie Mae Updates Delinquent Borrower Policy