Fannie Mae Cracks Down On Strategic Defaults

Strategic Defaults - To Walk Away Or Not:

Fannie Mae recently announced that it is attempting to end a strategic default from the homeowner.  A strategic default would be the homeowner has the ability to pay for their mortgage, but chooses to walk away because they are upside-down, or have too much negative equity.  Fannie Mae is stating that homeowners who strategically default and did not make a "good faith effort" to advert foreclosure will not be eligible for a Fannie Mae backed mortgage for 7 years.  Fannie Mae also left the door open to pursue deficiency judgments in an attempt to recoup any outstanding debt.

Why is Fannie Mae considering these actions?  It was reported that nearly 1/3 of defaults in March of 2010 were purposeful, or strategic.  Fannie Mae is a government backed entity, they don't like to lose money - heck, the government has given too much away to be satisfied that they're losing more.

You might think:  "Who cares if I cannot get a Fannie Mae backed loan for 7 years?  I'll get a mortgage backed by someone else."  Although this is certainly a possibility, almost 75% of the mortgages in the US are backed by Fannie Mae or Freddie Mac.  This number is probably poised to go even higher as time goes on.

My question as I found out the news is what does a "good faith effort" mean?  I believe it means that homeowners need to work with the lender to either do a loan modification, a short sale, or a deed in lieu of foreclosure.....Basically anything that you can do to work with the lender to avoid the "strategic default" or "walk-away" is a very good idea.

What should you do if you have negative equity or cannot afford your home because of your personal financial situations?  Feel free to contact us and learn more about the options you have available to you.