New Rules and Directives at Fannie Mae Encourage Foreclosure
Article by Christopher M Lee
New Rules and Directives at Fannie Mae Encourage Foreclosure – Finance – PersonalFinance
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Fannie Mae, a publicly traded, government owned mortgage securities firm is discreetly pushing lenders to foreclose on homeowners that have been in delinquency for 12 months or longer–even if they are applying for loan modification of postponement. This goes against federal foreclosure prevention programs like the Home Affordable Modification Program, which encourages banks through financial incentives and directives to help troubled homeowners keep their homes when faced with foreclosure.
Fannie Mae, along with Freddie Mac, is the largest mortgage securities firm in the country. Publicly traded and virtually owned by the US government, Fannie Mae was designed so banks and lenders could comfortably issue more credit to homeowners by federally securing bank mortgages.
A recent rash of newly released, confidential documents between Fannie Mae and banks, like PNC and Bank of America, instruct banks to deny requests for postponement of foreclosure if borrowers were more than 12 months delinquent. Even if the homeowner is applying for a loan modification through the HAMP program, Fannie Mae has asked banks to foreclose. This is in direct contradiction of the HAMP program, and it is unclear if it violates the law. What is more, these documents reveal that Fannie projects 10-12% of their foreclosure supply ‘to go to sale.’
Fannie turning up the heat on banks to move on year-old delinquencies
This move by Fannie is designed to pressure banks dragging their feet to foreclose on homeowners. After the housing bubble burst in 2007, many homeowners were left with an upside-down mortgage, and susceptible to foreclosure and short sales by the specter of high unemployment. Programs to assist millions of troubled homeowners were formed by the federal government. These programs were meant to steady the housing market and the flow of mass foreclosures, which would have added more toxic assets to the ledgers of banks and mortgage securities firms like Fannie Mae.
It remains unclear, now, what policy is informing the decision of Fannie to act in spite of federal efforts to assist homeowners. Regardless, many troubled homeowners may be out of luck if they have been delinquent 12 months or more.
Fannie Mae effectively endorsing foreclosure on part of lenders
Not all of Fannie Mae’s new foreclosure rules are ambiguous and confidential. In some states, Fannie Mae has changed its rules so that lenders can pursue foreclosure if a person is 120 days delinquent or more. Before that, in most cases, a borrower remains safe from foreclosure. However, as borrowers cross the 120-day threshold–even if in loan modification–the bank can begin foreclosure proceedings.
‘Dual tracking’ puts troubled homeowners at serious odds with lending institutions; now federal government
In what is being called ‘dual tracking,’ embattled homeowners are allowed a temporary loan modification, but must still fight in court to stop foreclosure. Banks and securities have been broadly denounced for dual tracking. For many homeowners in loan modification, inconsistency by lenders has been a hurdle. However, the sting for many homeowners is the federal government’s controversial mishandling of mortgage loan modification programs and mortgage back securities.
About the Author
The Lee Law Firms foreclosure lawyers have many years of experience in all aspects of mortgage loan modification. They have extensive knowledge of the mortgage modification process and aim to help their clients keep their house out of foreclosure and obtain a solid financial future.
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Christopher M Lee