No Mercy Shown For Those Who Flee Mortgage Loans

[Purveyor]

Washington -- The country's two largest sources of mortgage money have a blunt warning for anyone thinking about joining the growing "walkaway" trend, where homeowners stop making payments and months later send the house keys back to their lender: You will feel the pain.

On March 31, Fannie Mae sent out new guidelines to lenders intended for walkaways and other foreclosure situations. Fannie will now prohibit foreclosed borrowers from getting another mortgage through the giant investor for five years, unless there are "documented extenuating circumstances." In those cases, the mortgage prohibition is for three years.

Even after five years, borrowers with foreclosures in their files will be required to make at least a 10 percent down payment, and will need minimum FICO credit scores of 680.

Freddie Mac, Fannie's rival, counts foreclosures as major credit blots for seven years, and a senior official said the company is now aggressively pursuing some walkaway borrowers "to preserve our deficiency rights" where permitted under state law.

The walkaway trend is particularly noteworthy in former housing boom markets - including California, Florida and Nevada - where many homeowners find themselves upside down on their loans, owing tens of thousands more than the current market value of their houses. If they invested little or nothing in down payments, some owners reason, continuing to make payments - even if they can afford to - may be throwing good money after bad.

---EOE---

http://www.chicagotribune.com/classified/realestate/news/chi-re-harney-walkaway-warning-0apr13,1,2189193.story

[Sherman A1]

1. Well

If your back is against the wall... this really isn't much of a threat. It would probably take about 5 years to get one's personal finances back together anyway.

[EV_Ares]

3. Absolutely Sherman, yeah, when your back is against the wall, family

no kids, no money to pay the mortgage, "so what". Another two years they are adding onto the three, BFD, rent & try and get your life back in order again. The mortgage lenders would do better to try and figure out a fair solution to the problem for anyone and everyone willing to want to work through this crises instead of trying to throw up another roadblock.

[TheDebbieDee]

8. You're right. It may take about 5 years for many of these

people to get the courage to jump into the home ownership game again, anyway.

[gateley]

2. Good.

Beat up the little people some more. :sarcasm:

Even in a tragedy like this, this administration shows no compassion. Except for Bear Stearns.

[DemocratInSoCal]

4. ONLY BANKS & INVESTMENT BROKERS GET BAILED OUT!!

Are you a bank? No? Well, FUCK YOU THEN.

[elizfeelinggreat]

6. That's the bumpersticker

isn't it?

[Divernan]

11. The Senate package would have bailed out homebuilders too,

according to the report I heard on NPR. The Homebuilders' Association if one of the Big Three lobbying interests.

[SpiralHawk]

16. That's the republicon homelander philosophy in a nutshell

More tax moneybucks for the rich, dog shit & punishment for the middle class and poor. You got it.

[2Design]

5. this is so lenient - no 7 years and 20 % down - go and walk n/t

[Snarkoleptic]

7. Now more than ever, the banks want to work with borrowers.

Real estate owned (REO) inventories are at all time highs and the banks are overwhelmed with the volume of foreclosures.
If you walk away, your credit is screwed and you may end up still owing the bank if they sell the home for less than your mortgage balance (plus fees and interest).
If you negotiate a short sale (where the bank writes off a piece of the balance to facilitate your sale of the home), they can issue you a 1099 which will treat the amount that they wrote down as taxable income!
If you want to ride out the tough times and stay in the home, you may be able to negotiate a forbearance agreement, which is aimed at working out repayment plan.

In most cases, your credit will suffer tremendous damage.
Here's a way to game the system if your credit is damaged-
1) Apply for unsecured credit and get turned down(if your credit is jacked, you WILL be turned down)
2) Send your turn down letter to each of the three credit bureaus (your entitled to a free copy due to the TD)
3) Dispute (even the accurate) derogatory information
4) Lather, rinse, repeat until your credit is cleaned up
The system is in your favor here, because the creditors have 30-days to confirm or correct the credit reference.
If they don't respond to the credit bureaus within 30-days, the derogatory information must be removed.

I've been in the credit/financing/mortgage industry for 20+ years, you don't need to pay for credit repair.
Just follow the steps above and you'll clear up your credit in 6-8 months.

[Lars39]

9. Can they keep putting the derogatory info back on there?

:hi:

[Snarkoleptic]

18. It can creep back onto the report, but vigilant credit reporting agencies

have a low tolerance for creditors who misreport info that's been removed.

[Lars39]

21. Thank you for this information, Snarkoleptic.

:hi:

[TheDebbieDee]

10. Thanks for the info. Seriously, thanks.

I may try to clean up my own credit using this.....

[Sherman A1]

12. This sounds like good advice

and at the very least is worth giving it a shot for the folks that are in need of it.

[Snarkoleptic]

20. Beats the heck out of paying someone a couple of thousand to basically do the same thing.

[Purveyor]

13. In December, Congress enacted the Mortgage Forgiveness Relief Act, which excludes from taxation, in

most cases, "qualified principal-residence indebtedness." The exclusion is retroactive to Jan. 1, 2007.

[Snarkoleptic]

19. Banks will try every trick in the book to stick it to a borrower who has defaulted.

One little known trick is to get the bank to agree in writing not to "1099 you" for a balance written-down in a short sale.
As they say, everything is negotiable.

[Purveyor]

22. I can't see any bank wasting their time in filing a 1099 when they know that it is

fraudulent. Claiming 'income' due to a short sale is meaningless so says the US gov't (at least until 2009 that is).

[Snarkoleptic]

23. From what I've read, this law appears to exempt only purchase money mortgages on owner occupied.

If someone has done any sort of refi on the O/O res., they'll get nailed with the 1099-c

[kineneb]

17. got off the credit "grid" since bankruptcy

I just use a debit card. As a now no-income*, formerly low-income person, my new rule is: If I don't have the amount in cash, forget it. Thankfully, I have a house (really low pmts.) and car (paid off), so that was one piece of financial planning that actually worked.

*I took care of Hubby until he died at the end of March. We lived on his SSDI. At this point, I am not going to worry about much until the various wakes in his memory are over.

[aikoaiko]

14. that's not very tough.

5 years and 10% down.

gimme a break

[DadOf2LittleAngels]

15. Ummm how is this so bad..

"On March 31, Fannie Mae sent out new guidelines to lenders intended for walkaways and other foreclosure situations. Fannie will now prohibit foreclosed borrowers from getting another mortgage through the giant investor for five years, unless there are "documented extenuating circumstances." In those cases, the mortgage prohibition is for three years.

Even after five years, borrowers with foreclosures in their files will be required to make at least a 10 percent down payment, and will need minimum FICO credit scores of 680."

--

Ok so if you default on a mortgage you cant get another for five years and when you do youll need money down and good credit..