Fannie Mae Increases Penalties for Borrowers Who Walk Away
2010-06-23 18:21:47.438 GMT

Seven-Year Lockout Policy for Strategic Defaulters

WASHINGTON, June 23 /PRNewswire-FirstCall/Fannie Mae (NYSE: FNM) announced today policy changes designed to encourage borrowers to work with their
servicers and pursue alternatives to foreclosure.  Defaulting borrowers who
walk-away and had the capacity to pay or did not complete a workout
alternative in good faith will be ineligible for a new Fannie Mae-backed
mortgage loan for a period of seven years from the date of foreclosure.
Borrowers who have extenuating circumstances may be eligible for new loan in a
shorter timeframe.

"We're taking these steps to highlight the importance of working with your
servicer," said Terence Edwards, executive vice president for credit portfolio
management.  "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.  On the flip side, borrowers facing hardship who make a
good faith effort to resolve their situation with their servicer will preserve
the option to be considered for a future Fannie Mae loan in a shorter period
of time."

Fannie Mae will also take legal action to recoup the outstanding mortgage debt
from borrowers who strategically default on their loans in jurisdictions that
allow for deficiency judgments.  In an announcement next month, the company
will be instructing its servicers to monitor delinquent loans facing
foreclosure and put forth recommendations for cases that warrant the pursuit
of deficiency judgments.

Troubled borrowers who work with their servicers, and provide information to
help the servicer assess their situation, can be considered for foreclosure
alternatives, such as a loan modification, a short sale, or a deed-in-lieu of
foreclosure.  A borrower with extenuating circumstances who works out one of
these options with their servicer could be eligible for a new mortgage loan in
three years and in as little as two years depending on the circumstances.
 These policy changes were announced in April, in Fannie Mae's Selling Guide
Announcement SEL-2010-05 .  

Fannie Mae exists to expand affordable housing and bring global capital to
local communities in order to serve the U.S. housing market. Fannie Mae has a
federal charter and operates in America's secondary mortgage market to enhance
the liquidity of the mortgage market by providing funds to mortgage bankers
and other lenders so that they may lend to home buyers. Our job is to help
those who house America.

SOURCE Fannie Mae