Homeowners who walk away from Fannie Mae mortgages will be snubbed for seven years, according to the Associated Press. Fannie Mae says they’re trying to encourage homeowners to avoid foreclosure by banning those who walk away from getting loans. The idea is to deter homeowners who could pay from simply walking away from their responsibilities. “Walking away from a mortgage is bad for borrowers and bad for communities and our approach is meant to deter the disturbing trend toward strategic defaulting,” Terence Edwards, executive vice president for credit portfolio management, told the AP.
A strategic default is when a homeowner simply stops making their mortgage payments even if they have the means to do so. According to the LA Times, 31 percent of foreclosures are strategic as of last March. In March of 2009 22 percent were considered strategic. Fannie Mae plans to take legal action against these types of mortgage holders in areas where the law allows them to.
For those who default on mortgages there’s a five year wait to get a new one with lender Freddie Mac, but officials say they may change that to match Fannie Mae’s new policy. “We’ll consider it in light of current market conditions in order to manage our risk as effectively as possible,” Freddie Mac spokesman Brad German told the Associated Press. However, both companies say they’ll work with homeowners who need to modify their loans in order to afford payments.
Tags: freddie mac, Subprime mortgage crisis, Economy of the United States, fannie mae
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