MORTGAGE UNDERWATER?: JUST WALK AWAY? --- FANNIE AND FREDDIE MAKE IT EASIER

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The Federal National Mortgage Association ("FANNIE MACE") and the Federal Home Loan Mortgage Corporation ("FREDDIE MAC") are making it easier for some homeowners with hardships to walk away from their "underwater" home loans.

Under new guidelines that go into effect March 1, 2013, homeowners with mortgages backed by one of these 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.

As of March 1, 2013, borrowers who are current on their mortgage but meet certain criteria will be eligible for a deed-in-lieu of foreclosure or "mortgage release." Mortgage giants Fannie Mae and Freddie Mac will offer loan servicers $1,500, up from $275, for every deed-in-lieu completed following the new guidelines on or after that date, and will offer up to $6,000 to second-lien holders to expedite deeds-in-lieu.

The changes are a result of a push by the Federal Housing Finance Agency (FHFA), which regulates Fannie and Freddie, to streamline servicing requirements and paperwork between the two entities. In November, 2012,  short-sale guidelines that were part of the same streamlining initiative went into effect and are expected to boost short sales.

As part of the new deed-in-lieu guidelines, borrowers who are 90 days or more delinquent must be experiencing and document one of 10 eligible hardships:

1. Unemployment.
2. A hardship that has caused a reduction in income due to circumstances outside their control (fewer regular working hours, for example).
3. A hardship that has caused an increase in housing expenses due to circumstances outside their control.
4. Divorce or legal separation, or separation of borrowers unrelated by marriage, civil union or similar domestic partnership.
5. Death of a borrower, or death of either the primary or secondary wage earner in the household.
6. Long-term or permanent disability, or serious illness of a borrower or co-borrower or dependent family member.
7. Disaster (natural or man-made) adversely impacting the property or borrower's place of employment.
8. Distant employment transfer or relocation.
9. Business failure.
10. Other: a hardship that is not covered above.

For mortgage loans that are current or less than 90 days delinquent, only borrowers with one of two of the hardships above would be eligible: (a) the death of a borrower or co-borrower, or the long-term or permanent illness or (b) disability of a borrower or co-borrower or dependent family member.

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[see, realestate.msn.com/blog/listed-loans.aspx/2-11/2013/ "New Walkaway Alternative For Underwater Borrowers"; www.inman.com/news/2013/02/4/ "Fannie and Freddie Streamline Deeds-in-Lieu"; careeratnrc.com/ "New Rules for a Deed-in-Lieu of Foreclosure - Effective March 1st, 2013"/2-16-2013]