Friday, October 26, 2012

Fannie & Freddie - May deal with you afterall

Many of our clients are underwater with their home mortgages.  They come into our office to discuss their options - short sale, stay, try to do a work-out with lender- its a tough road.  If you have never missed a payment on your property and are not delinquent, not all lenders will deal with you. 

The following article is defintely newsworthy and interesting for those with Fannie and Freddie mortgages:

WASHINGTON – Oct. 25, 2012 – Mortgage giants Fannie Mae and Freddie Mac have issued new rules effective Nov. 1 that will allow short sales for underwater borrowers who have never missed a mortgage payment. Previously, Fannie and Freddie allowed only homeowners who had missed payments to qualify for a short sale.

However, eligible short-sale owners will need to show a hardship to qualify for a short sale under the new rules. Hardships may include unemployment or the death of a spouse.

The new rules won’t help credit scores, however. The non-delinquent short sellers will likely take just as big a hit to their credit score as delinquent homeowners who have missed loan payments and gone into foreclosure, according to Kenneth Harney, writing in Inman News.

“Under current national credit reporting practices, those non-delinquent borrowers are likely to be treated the same for credit scoring purposes as severely delinquent owners who go to foreclosure after months of nonpayment, or who simply toss back the house keys and walk away in strategic defaults,” says Harney.

Credit agencies have no special coding that indicates a short sale occurred without an accompanying delinquency. Therefore, homeowners could see their credit scores drop 150 points or more after a short sale.

However, officials at the Federal Housing Finance Agency (FHFA), which oversees Fannie Mae and Freddie Mac, say they are “in discussions with the credit industry” to explore ways to fix the credit score problem for people who haven’t missed a payment before undergoing a short sale.

Source: “Damage to Credit Scores Could Trip Up New Fannie, Freddie Short Sale Program,” Inman News (Oct. 23, 2012)

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