Penalties Increase for Borrowers Who Walk Away

Borrowers who consider walking away from their mortgages have yet another reason to think twice.  Fannie Mae has implemented a new policy that penalizes borrowers who walk away even though they had the ability to pay or who did not complete a workout arrangement.  Such borrowers now will be ineligible to obtain a Fannie Mae-backed loan for seven years.  However, borrowers who experience extenuating circumstances may be eligible for a new loan within two to three years depending on the situation.  Fannie Mae is also considering legal action to recoup the outstanding loan debt from borrowers who strategically default on their loans in jurisdictions that allow for deficiency judgments.
Fannie Mae plans to instruct its servicers to monitor delinquent loans facing foreclosure and recommend cases that might warrant the pursuit of deficient judgments.

Why is there a Limit on the Number of Financed Properties?

In 2008 Fannie Mae reduced the number of allowable financed properties from ten to five, only to reverse it a year later.  Unfortunately, a majority of the lenders have refused to change back to the ten mortgage cap.   Banks are licking their wounds with all of the foreclosed investment properties from back in the day.  Remember the 100% stated, investment program? Every bank is different.   Most banks will only permit up to four mortgages, maybe five, as long as the fifth property is a primary residence.  The lenders allowing financing for up to ten properties typically do not offer the best brother-in-law rates and may only loan on one property, limiting their investment exposure. Question:  A buyer would like to finance two investment properties.   He already owns three properties.  But there is a fourth his ex-wife received in the divorce and his name is still on the mortgage.   He is having a hard time finding a lender?  Why?   The issue with the property in the ex-wife's name is tricky.  Fannie Mae's guidelines state that if you have a court order (such as divorce decree); the lender is not required to evaluate the payment history.     Conventional Wisdom tells us that as long as there is a divorce decree that spells out the transfer of title to the ex-wife and she can provide bank statements and/or cancelled checks proving she has been making the payments out of her own checking account, that would be cool with the lender.  But lender's don't think that way in today's market.    The bank's will have their own interpretation. FYI:  Some lenders gauge the number of mortgages NOT properties.  So, if you have three investment loans, and a first and second on your primary, that may be considered five mortgages. Yes, It Is True: One bank will not allow out of state borrowers to finance investment properties.  It is gonna hurt if the loan officer is not aware of that cute nuance until underwriting.