Dennis Norman
Last month I wrote about a new policy implemented by Fannie Mae that would “lock-out” borrowers from getting a Fannie-Mae insured loan for 7 years if they did a “strategic default” or otherwise did not act in good faith and were foreclosed upon. In a nut shell, the borrower that Fannie Mae is targeting here is the borrower that has the financial ability to make their payments, accept a loan modification or other “work-out” from Fannie Mae but instead chooses just to walk away from their home and letting the lender foreclose.
In addition to locking out borrowers from a new loan for 7 years Fannie Mae has also made it clear in a recent announcement that they will “take legal action to recoup the outstanding mortgage debt from borrowers who strategically default on their loans“. Obviously, they can only do this in those States that allow a lender to sue a borrower for a deficiency but many states allow this. Many real estate agents have been working with clients to try to help them deal with being underwater on their homes, facing foreclosure, etc and even suggesting or coaching them through a “strategic default”. Not only should agents not be giving legal advice, it is clear that they should not be advising clients to do a strategic default either in light of the consequences to the borrower. Recommending the client seek appropriate advice from an attorney and CPA is probably the best advice to give to a borrower considering a strategic default.
Fannie Mae said that this month (July) they will be instructing its servicers to monitor delinquent loans facing foreclosure and put forth recommendations for cases that warrant the pursuit of deficiency judgments.
Related posts:
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