Fannie Mae and Freddie Mac will allow some underwater borrowers who are ineligible for a loan modification or a short sale to obtain a deed-in-lieu of foreclosure from their banks even if they are current on their mortgage payments, Inman News reported Feb. 4.
The new guidelines will go into effect March 1.
Borrowers who are current on payments or less than 90 days delinquent will be able to take advantage of the deed-in-lieu option only in the event of the death of a borrower or co-borrower or long-term or permanent disability, Inman News reported.
Borrowers who are 90 or more days delinquent on their mortgage payments will be allowed to perform a deed-in-lieu if they meet certain guidelines, which include unemployment, a hardship causing reduction in income or increased housing expenses, divorce or legal separation, death of a borrower, long-term disability, disaster, distant employment relocation or business failure.
The new guidelines also will raise the amount that government-sponsored enterprises will pay loan servicers. The payment will be $1,500 for each new deed-in-lieu they complete, up from $275. The GSEs also will offer up to $6,000 to second-lien holders, Inman News reported.
Homeowners who have sufficient assets will have to contribute funds to cover part, if not all, of the shortfall between the outstanding loan balance and the property’s market value.
The new guidelines are part of the Federal Housing Finance Agency’s efforts to streamline servicing requirements between the two GSEs.
Housing experts noted that while the guidelines should help borrowers get out from under underwater mortgages, they also will likely add to GSE losses. Taxpayers have so far bailed out the two GSEs to the tune of $190 billion, only $50 billion of which has been paid back, Inman News reported.