Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) formulated revised rules on delinquent loans. The measure is also implemented by Federal Home Loan Mortgage Corp (OTCBB:FMCC).The interested buyers of mortgages have to take into account default borrowers for loan modifications.
All those Investors who intend to buy delinquent mortgages offered by Federal National will be required to take tough measures to close agreements. The deal is meant to allow borrowers to keep their houses even before they are said to leave it. As and when these revised rules will be implemented it will result in fewer foreclosures. The only problem linked to revised rules is the cost will be transferred to taxpayers.
The rules from Federal National require investors to evaluate certain measures including forgiving mortgage principal amount or extending the loan period. They can even consider opting for a short sale before foreclosure. Whenever it is considered for foreclosure, it has to be marketed for first twenty days. The revised rules also allow investors to decide about selling loans to nonprofit organizations or to those interested buyers who plan to live in the house. The buyers who don’t intend to live in the house would not be considered in the process.
Federal Home and Federal National don’t create mortgages. Instead the two companies buy loans from lenders. These loans are then converted into securities and given as guarantees to investors. Both of the companies make efforts to reduce the losses by acquiring a borrower to pay for it. If it fails, it finally opts for foreclosure of the property.
Conversion of securities
The conversion process of mortgages into securities and then offering it to buyers is a lengthy process and consumer time. For the same reason, Federal National lately decided to offer the mortgages to investors who would complete the process themselves.