New walkaway alternative for underwater borrowers
Fannie Mae and Freddie Mac are making it easier for homeowners with hardships to give up their homes. But borrowers may be asked to pay for the privilege.
Fannie Mae and Freddie Mac are making it easier for some underwater homeowners to get rid of their homes.
Under new guidelines that go into effect March 1, homeowners with mortgages backed by one of the two government-sponsored enterprises can do what’s called a "deed in lieu of foreclosure" – essentially, hand the house or condo back to the lender.
The program isn’t available to all homeowners with underwater mortgages backed by Fannie or Freddie. To qualify, a homeowner who is at least 90 days delinquent must demonstrate one of 10 hardships, including loss of a job, decline in income, divorce, relocation or death of a spouse.
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Homeowners who are current on their mortgage payments or fewer than 90 days behind can take advantage of the program only if their total debt-to-income ratio is above 55% and they have experienced a death or disability in the family.
"Fannie and Freddie are finally recognizing that some people are stuck in their homes," Julia Gordon, director of housing finance and policy at the Center for American Progress, told Bloomberg. "There are a lot of families who need to move who can’t do it if they’re going to have debt hanging over their heads."
While the program offers an alternative to homeowners who have suffered hardships but are still making payments, it is not a "get out of the loan free" card. Homeowners who can afford it may be asked to pay up to 20% of their savings, including retirement accounts, or sign a promissory note to make future payments. You can read more details here and here.
To get loan servicers to cooperate with the new program, Fannie and Freddie are increasing the payment to servicers for a "deed in lieu" from $275 to $1,500. Some homeowners will be eligible for up to $3,000 in relocation assistance.
Homeowners whose mortgage is backed by Fannie Mae and Freddie Mac -- about 50% -- are ineligible for any refinancing that includes a principal reduction. But the two entities have moved to streamline the short-sale process.
You complainers should have scrimped and saved up at least 20% down payment and then bought property you could afford. It's called living within your means, not giving in to immediate consumer gratification and keeping up with the Jonses. Now you EXPECT us savers to pitch in tax money to bail your irresponsible butts out.
The reason they want you behind on payments is so when they refuse to modify for you, you can;t qualify for another loan becuse your credit is screwed. I got a trial modifcation for 6 months at 1%, paid on time, every pmt,. then they refused to do it because they sad my ncome didn't qualify (DUH).
Funny They gave me a refinance at 5%. How did I qualify then?
Been thru the make beleive modifications. They make beleive they are going to give you one.
Never Happens. The FHA announced early in this mess that they would back ALL loans whether they were originally insured or not. Then the banks realized that they could collect twice. Now they colect from the federal insurance and then they sell your home and collect again.
THAT'S WHY THEY MAKE YOU THINK THEY RE WORKING WITH YOU, BUT THEY ARE NOT!
Rod man; I am not sure who you have been talking to or how much knowledge they may have when it comes to guidelines and programs that may be available to consumers in today's marketplace,but if you would like to talk to a seasoned professional that does understand self employed borrowers and the guidelines and programs available, I would be more than happy to help. firstname.lastname@example.org
Pay for the privilege? Ridiculous!
I'm self employed, went into business 1 year before everything tanked, bought a $400,000.00 property to live in and operate my business from.Bought on a no doc loan as I had a 760 credit score.After settlement my loan was sold to countrywide, they sold it to Bank of America. I 've never missed a payment, 2 years in I tried to refinance my 7-1/2 percent loan to 3%, because I;m self emloyed, and my property is a "duel use" property they would not refinance!!
I questioned WHY does a duel use matter if they already hold the loan, they would not answer me and just refused to do any more for me.I guess they hated to cut a little guy a break, and they hated to lose a 7% loan that pays.
NOW, 3 years and 1 bankruptcy later my business is way down, I had to drop my health insurance, I cant afford basic medical care, and my teeth are rotting out, but my MORTGAGE is still current 4 months ago I finally decided I'm sick of suffering, My propety is at least 100K underwater,and I cant pay my bills.
In october I applied for a harp modification.I gave them all they asked for, and they just keep asking for the same stuff over agin, 3 different ways.I ask why and they dont return phone calls, even the managers dont call back, I feel like they want me to default so they dont have to help me..I'm losing my patience. What they dont know about me is I will not walk away, and I will not give up, THEY WILL do something for me, our FINE president said they will, and I'm holding him to it, if you see a guy on the news camping out on the whitehouse lawn with a sign, it may be me.
I already filed a complaint with the feds, and I'm in the process of sending letters to EVERY member of state and federal congressmen to expose these banks tactics, I will not stop untill I get results, I'm NOT losing my property to a bad economy.
I feel bad for all you folks who lost your jobs in this crap economy, and in turn lost your houses, it sucks, you do everything by the book and you still get beat up.I'm self employed, and believe me, its been tough, I work 12 hours a day, and most saturday and sundays to TRY to stay ahead, I'm 51 now and it sucks to work this much to stay alive, but my business IS my dream, so i'm committed to staying in the game no matter what.
The gov't and the press can crow all they want about how things are getting better, trust me their not, at least not down where I am.
The real lesson in all this is to do your best to rely only on yourself, and PAY CASH for everything you can, all o f us made these banks rich by charging everyting and living beyond our means, my best day ever was going chapter 13 and teling all my creditors SEE YA, suckers.KEEP your credit. NOW i'm poor, but DEBT free.The banks cant stand the fact that I'm debt free, credit card offers come DAILY in the mail now that i'm discharged from bankruptcy, I TRASH all of them.
BANKER FRAUD YOU are a SLAVE go to Expose the Banker Private FED Reserve Private Banker Money Changers at the TemplesExpose the FRAUD
Go to You Can help make a change TELL OTHERS
it is ALL Bankster FRAUD Read YOUR Deed it still calls you a Tennant YOU will NEVER own your so called land as long as this FRAUD continues Backed by our US Senante
It’s simply beyond my imagination why banks choose to foreclose instead of refinance an underwater mortgage when the owner’s credit and payment capability is good. Banks do these kinds of deals all the time with corporate clients and especially between themselves using derivatives and other collateral that is far more suspect and risky than a home. Furthermore, foreclosure puts banks in the physical real estate business where they really don’t want to be and clearly have no particular expertise in. It seems to me like homeowners have done a good job of accepting the new reality of the economy and the housing market. It’s time the banks did the same.
About Teresa Mears
Teresa Mears is a veteran journalist who has been interested in houses since her father took her to tax auctions to carry the cash at age 10. A former editor of The Miami Herald's Home & Design section, she lives in South Florida where, in addition to writing about real estate, she publishes Miami on the Cheap to help her neighbors adjust to the loss of 60% of their property value.