Industry NewsMortgage

Fannie cracking down on walkaways

'Strategic defaults' can lock buyers out of market for 7 years

Editor's note: This story has been edited to clarify that Fannie Mae is extending the waiting period for borrowers who have been foreclosed on to apply for a new loan from five to seven years, unless they can show extenuating circumstances such as a job loss.Fannie Mae says it will get tough on borrowers who engage in "strategic defaults," or walk away from a home that's worth less than what's owed on the mortgage even if they can afford to keep making their payments.Economist Mark Zandi of Moody's Analytics has estimated that 9 million homeowners are "underwater" by more than 20 percent, making them more likely to consider a strategic default.Fannie Mae said Wednesday that it will not only refuse to guarantee another loan for seven years if it has evidence that a borrower chose to default on their loan, but will seek to recoup losses in court through deficiency judgements in states that allow lenders such recourse.There's a carrot-and-stick aspect to the new policy...