Fannie Updates Policies for Loan Eligibility After a Pre-Foreclosure Event
DSNEW.COM – By: Brittany Dunn: In an effort to support overall market stability and reinforce the importance of borrowers working with their servicers when they have difficulty repaying their
debt, Fannie Mae has updated several policies regarding borrowers’ future eligibility to obtain a new mortgage loan after experiencing a pre-foreclosure event, including a deed-in-lieu of foreclosure, pre-foreclosure sale, or short sale.
Under these new policies, Fannie Mae is changing the waiting period required for a borrower to be eligible for a mortgage loan after a pre-foreclosure event. The waiting period, which commences on the completion date of the pre-foreclosure event, may now vary on the loan-to-value (LTV) ratio for the transaction, occupancy of the property, and whether extenuating circumstances played a part in the borrower’s inability to pay his or her mortgage.
Current waiting-period requirements are four years for a deed-in-lieu of foreclosure, two years for a pre-foreclosure sale, and no policy currently exists specific to short sales. But under the new guidelines, waiting periods will be determined by LTV ratios, not the type of pre-foreclosure event.