Mortgage servicers, including credit unions, have a new stick to wield with loan borrowers who might contemplate walking away from a mortgage commitment, according to new policy from Fannie Mae.
Borrowers who walk away from their mortgage commitments in so-called "strategic defaults" will face a full seven year wait before they can be approved for a mortgage that can be sold to Fannie Mae, the mortgage giant said in its new policy. But if the borrowers work with the servicer towards coming up with an alternative to foreclosure, they maybe able to apply more quickly for a mortgage that could be sold on the secondary market that Fannie Mae still dominates.
"We're taking these steps to highlight the importance of working with your servicer," said Terence Edwards, executive vice president for credit portfolio management. "Walking away from a mortgage is bad for borrowers and bad for communities and our approach is meant to deter the disturbing trend toward strategic defaulting. On the flip side, borrowers facing hardship who make a good faith effort to resolve their situation with their servicer will preserve the option to be considered for a future Fannie Mae loan in a shorter period of time."
Fannie Mae said it would also " take legal action to recoup the outstanding mortgage debt from borrowers who strategically default on their loans in jurisdictions that allow for deficiency judgments."
And Fannie Mae said it would begin asking mortgage servicers, including credit unions, to "monitor delinquent loans facing foreclosure and put forth recommendations for cases that warrant the pursuit of deficiency judgments."
Fannie Mae said the new policy will take effect Oct. 1 for manually underwritten loans and that a future release of desktop underwriter will include the new policy, the company said.