Walk Away and Fannie Mae Will Chase You Down

Many lending institutions are beginning to take action against those who decide to walk away. Fannie Mae, according to an article in Housing Wire, announced:

• Borrowers who are determined to have the ability to make their monthly payments but walk away from their homes will not be able to secure a Fannie Mae backed mortgage for seven years after the foreclosure.
• Fannie Mae will also take legal action against borrowers who strategically default in order to recoup mortgage debt.

What does this mean to you?


Considering a strategic default? Know the ramifications before ‘walking away’ from your mortgage obligation.

Sorry for the delay!

Yes, I know it has been a week since I have posted.  It has been a crazy week with no time to write.  I think this is a good thing altogether.  I had 3 short sales approved this week!  Yes, I think we are about to see some improvement in the time it takes to complete a short sale.  My longest time is 17 months, and my shortest is 3 months.  Let's hope this week is a sign things are improving.

Simple Real Estate Definitions : Short Sale

A "Short Sale" is when a home seller sells his home for a lesser amount than what is owed on his mortgage, and the mortgage lender agrees to accept the lesser amount in lieu of a full payoff.

By way of example, a Short Sale may be appropriate for a home seller whose mortgage balance is $250,000 but whose home wouldn't sell for more than $220,000.  Rather than pay the $30,000 difference to the lender at the time of sale, the seller enters into an agreement with the lender by which all sale proceeds are paid to the bank and the deficient balance is forgiven.

Short Sales are a preferable alternative to foreclosure but the process still harms both parties. For one, the seller is penalized with a derogatory tradeline on credit for not fulfilling a mortgage obligation. And, two, the lender is forced to take a loss on a mortgage loan.  Versus an executed foreclosure, however, Short Sale damages are relatively limited on both sides.

For this reason, Short Sales are sometimes considered "the economical alternative" to default.

The process of getting a Short Sale approved varies from lender-to-lender and can be time-intensive. Home sellers should not go at it alone -- speaking with a real estate agent about the proper protocol is usually the best place to start.  And sellers should be aware of how a Short Sale on their credit can impact future borrowing.

Current Fannie Mae guidelines prevent short-selling homeowners from obtaining new mortgage financing for a period of 2 years.