Fannie Mae is sifting through borrower data to determine who is strategically defaulting and who is not after announcing more efforts this week to crack down on those who walk away from their homes. And if the GSE determines someone strategically defaulted, then they say they will hold the borrower accountable for all associated costs of getting the house back on the market, in areas that lawfully allow deficiency judgments, see Fannie Mae Mortgage Modification guidelines.
Often when a home forecloses, Fannie Mae brokers and contractors discover vandalism and missing appliances and fixtures when they ready the home for resale, the GSE said. The cost of making those repairs and replacements will be included in the determination of the deficiency amount, a Fannie Mae spokesperson said, in addition to the difference in the mortgage balance and the proceeds from the foreclosure sale.
Those who Fannie Mae and its servicers deem strategically defaulted will not be able to secure a Fannie Mae-backed mortgage for seven years after the foreclosure and could face legal action in order for the company to recoup mortgage debt.
Homeowners who strategically default or did not work “in good faith” to prevent foreclosure through other means will be ineligible for new Fannie Mae-backed mortgages for seven years. In addition, the firm said that it will pursue homeowners in court, seeking so-called “deficiency judgments” to recoup outstanding debts by seizing borrowers’ other assets. 39 states do not limit the ability of lenders to recover what they’re owed.
In July, Fannie Mae said that the firm “will be instructing its servicers to monitor delinquent loans facing foreclosure and put forth recommendations for cases that warrant the pursuit of deficiency judgments.”
Fannie will base its assessment of who is and who isn’t walking away from their home on income verification, information on the borrower’s credit report, and borrower documentation related to the disposition of prior mortgage loans, the spokesperson for Fannie said.
When a borrower applies again for a Fannie Mae-backed mortgage, he or she would have to produce evidence of hardship or extenuating circumstances to get the loan.
“Borrowers who worked with their servicers to address delinquency and/or avoid foreclosure, will be viewed more favorably than those who do not,” the spokesperson said.
According to the announcement this week, Fannie is instructing its servicers to monitor delinquent loans on the verge of foreclosure and recommend cases where the company can pursue deficiency judgments.