Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) introduced new rules on delinquent mortgages. The step is also followed by the regulator Federal Home Loan Mortgage Corp (OTCBB:FMCC).The buyers of loans have to take into account delinquent borrowers for loan modifications.
Investors who want to buy delinquent loans backed by Federal National need to put in more efforts to reach deals. The agreement should allow borrowers keep their homes even before pushing them out. The implementation of these rules can restrict the number of foreclosures. However, it can come at the cost of taxpayers’ money.
The new rules
The rules from the regulators require investors to consider forgiving mortgage principal or extending loan terms, or going for a short sale before foreclosure. In the event of foreclose; the property will be marketed for first twenty days. Also, the investor can decide it to sell to nonprofit groups or to those buyers who plan to live in the house. They should not consider those buyers who intend to sell it to other investors.
Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Federal Home don’t make mortgages instead buy loans from lenders, and then convert them into securities and presents them as guarantees to investors in the event of default. The two companies try to minimize the losses by getting a borrower to pay for it or finally going for foreclosure of the property.
The new measures
The process of conversion into securities and selling to buyers takes time and therefore Federal National and Federal Home have lately decided to sell the nonperforming mortgages to investors who would conduct the process themselves. The loan buyers will also have freedom to take measures to keep homeowners in places. They can do it by reducing mortgage principal balances, which federal National and Federal Home are largely restricted from doing. The rules can result in lower mortgage prices and steeper taxpayer losses.