Fannie Mae is beginning to implement some changes to its policies regarding distressed homeowners. The institution is now moving towards helping currently distressed homeowners maintain their ability to own a home, by giving them second chances. Intended to support the housing market and incentivize homeowner cooperation with lenders, Fannie Mae will now offer homeowners who grant a “deed-in-lieu of foreclosure” a shorter waiting period before they will be able to qualify for a new Fannie Mae mortgage.
Historically, this waiting period has been at least four years, which is to say that if you, as a Fannie Mae borrower lost your home to foreclosure, you would not be eligibly for another Fannie Mae mortgage for at least four years from the date of foreclosure. Now, however, this waiting period is being reduced by half.
With the new two-year waiting period, homeowners will be required to put at least twenty percent of the purchase price as a down payment, however. This new policy will begin to take effect on July 1 of this year. Fannie Mae is hoping that offering such incentives to these homeowners will be helpful to the country’s recovery as well as setting forth a policy that homeowners who work with lenders are less risky to deal with and better than homeowners who simply abandon their mortgage obligations or fight the lenders for short sales.
Fannie Mae’s policy may be, in part, a reaction to Obama’s HAFA program which is aimed at homeowners who do not qualify for modifications and other foreclosure alternatives. Industry expert are predicting a dramatic increase in “pre-foreclosure” activities this year and next year, which Fannie Mae is hoping to alleviate through its new policy.
Mitra Karimi
Crestico, Inc.
The National Association of Realtors has a message it would like to get across and that message is that "America needs Fannie and Freddie." Who are these people that we have been hearing a lot about in the news lately? They are Fannie Mae and Freddie Mac.
According to Realtor Frances Martinez who was the speaker representative at a House Financial Services Subcommittee hearing on June 3, 2009, "Fannie Mae and Freddie Mac serve an important role in expanding homeownership and providing a solid foundation for our nation's housing financial system…Unlike private secondary market investors, Fannie and Freddie remain active in housing markets during downturns, using their federal ties to facilitate mortgage finance and support homeownership opportunities for all qualified borrowers."
Fannie and Freddie are government sponsored organizations that basically insure the success of our nation's housing system, the cornerstone of our economy. Fannie and Freddie work to make sure that all Americans have and will continue to have access to the fair and affordable mortgages. Just think, without Fannie and Freddie, when the market crashed, there would have been no alternative and all housing sales would have essentially come to a dead stop and this would have thrown our country into a deeper economic crisis.
All in all, Fannie and Freddie basically guarantee that there will be a secondary mortgage markets where people can safely and securely buy their homes and achieve the American dream. Getting a mortgage can be a scary thing. Thankfully, we have a country, a government and a system in place to make sure that the days of predatory lending and fraudulent behaviors in the lending industry are behind us.
The National Association of Realtors has a message it would like to get across and that message is that "America needs Fannie and Freddie." Who are these people that we have been hearing a lot about in the news lately? They are Fannie Mae and Freddie Mac.
According to Realtor Frances Martinez who was the speaker representative at a House Financial Services Subcommittee hearing on June 3, 2009, "Fannie Mae and Freddie Mac serve an important role in expanding homeownership and providing a solid foundation for our nation's housing financial system…Unlike private secondary market investors, Fannie and Freddie remain active in housing markets during downturns, using their federal ties to facilitate mortgage finance and support homeownership opportunities for all qualified borrowers."
Fannie and Freddie are government sponsored organizations that basically insure the success of our nation's housing system, the cornerstone of our economy. Fannie and Freddie work to make sure that all Americans have and will continue to have access to the fair and affordable mortgages. Just think, without Fannie and Freddie, when the market crashed, there would have been no alternative and all housing sales would have essentially come to a dead stop and this would have thrown our country into a deeper economic crisis.
All in all, Fannie and Freddie basically guarantee that there will be a secondary mortgage markets where people can safely and securely buy their homes and achieve the American dream. Getting a mortgage can be a scary thing. Thankfully, we have a country, a government and a system in place to make sure that the days of predatory lending and fraudulent behaviors in the lending industry are behind us.
Foreclosure Moratorium: Good Thing or Bad Thing?
Today, the news reported that foreclosure figures were down for the month of January. The Riverside and San Bernardino areas of California have been some of the hardest hit areas when it comes to struggling homeowners and foreclosures. Record numbers of defaults and foreclosures have been reported. Press Enterprise reported that there were 17,629 foreclosure-related actions in Riverside and San Bernardino counties in January, according to a report released by RealtyTrac, an Irvine-based firm that markets properties online. That is 8 percent less than December in the two Inland counties but about 40 percent more than January 2008. Recently, mortgage giants, Freddie Mac and Fannie Mae imposed a moratorium on foreclosures, effectively barring lenders from foreclosing on any properties.
Although this may sound like a good thing, it may not be. Stopping foreclosures with a moratorium, may not be the answer to our mortgage crisis. Even though the numbers of foreclosures have been reduced, this reduction may not necessarily lead to the solution of the crisis because moratoriums often add costs to the foreclosure process and leave servicers and borrowers with effectively "bigger" bills to pay. Additionally, moratoriums result in impediments on statutorily required actions like sending breach letters, notices of default, and debt accelerations.
Not allowing foreclosures to take place does not save homes where the property has been abandoned, converted and is not profitable, damaged, subject to code violations, and where borrowers may have sufficient income to pay their loans but choose not to because of the moratorium. Delaying foreclosure in these aforementioned cases will not only result in higher costs for servicers and borrowers but will also lead to the deterioration of the properties.
Furthermore, one definite side effect of moratoriums is an increase in the number of delinquencies and defaults. A moratorium essentially motivates the faltering borrower to stop making payments. Borrowers who were once stretching, working more hours, adjusting their lifestyles and even liquidating assets to make their mortgage payments to avoid foreclosure now have no motivation to pay their mortgages. Also, these borrowers will then face an increased risk of never being able to recover from their situations. As more penalties and fees are incurred and increased motivation is provided to stay delinquent, the chances for recovery become increasingly reduced.
Another unintended side effect is the undue pressure that will be put on the servicing companies of these loans. The cost to continue to advance principal, interest, tax and insurances payments during the time that borrowers are not paying will cause severe financial hardships for these companies, especially since they do not own the loans, but merely service them.
Ultimately, while the words sound like they hold the answer to the current crisis we are facing, one must look deeper into the proposed "solution" and truly reveal the impact that this "solution" will have on our society and economy. To further distress already distressed parties, in my opinion, would not present a solution to our crisis. While a moratorium is a good first step, it is only beneficial if we use the time to seek and find other answers to our problems that would result in actual positive results.
