Lenders are starting to crack down on “Strategic Defaults”.
Fannie Mae has announced stiffer penalties to consider if you decide to walk away from a mortgage that you can afford to pay. Starting in the fall, Fannie Mae will disqualify borrowers for a period of seven years if they choose to default on their mortgage even though they have the ability to pay. Fannie Mae also plans to take such borrowers to court to recover loan losses resulting from this type of default.
There is a bill working it’s way through Congress that would also prevent you from getting an FHA insured mortgage if you have previously “walked away” from a mortgage. Since it makes sense that you would be viewed by Lenders as a higher risk after taking this action, I think we can expect this bill to pass. We have blogged before about the possibilities of a Short-pay Refi or a Short sale so if you are considering Strategic Default it is time to review other avenues. USA Today has a more in depth article on Strategic Default which will fill you in on the upcoming changes. Click here to read the USA Today article.