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Fannie Mae offers carrot for deed-in-lieu of foreclosure

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To encourage distressed borrowers to agree to deeds-in-lieu of foreclosure, Fannie Mae is reducing the waiting period -- from four years to two years -- for them to become eligible for a new mortgage. The new policy, which will apply to loan applications submitted after June 30, requires a minimum downpayment of 20 percent from borrowers who have agreed to a deed-in-lieu within the past two years. Borrowers with a deed-in-lieu in the past two to four years will be required to put 10 percent down to be considered for a Fannie Mae-backed loan. Borrowers who lost their homes due to "extenuating circumstances" beyond their control -- such as the loss of a job, illness or divorce -- can put as little as 10 percent down after two years. Those loan-to-value ratios will also apply to borrowers who have been involved in short sales and who were already subject to a two-year waiting period. Bankruptcies and foreclosures are expected to damage millions of borro...