This new stipulation is designed to prevent even further losses that might happen if borrowers who are not financially stressed decide to do a "strategic default" on their mortgage due to the fact that they owe much more than the current value of their homes.
The reason for the new requirement is to discourage the current trend of "strategic defaults" from continuing or even increasing, according to a representative from Fannie Mae. When people walk away from their mortgage there is a negative result for their communities and, should the practice continue, the housing market could suffer further.
Fannie Mae, a large mortgage finance company which is owned by the Federal Government also intends to increase legal actions in order to go after deficiency judgments in those states that permit lenders to pursue the assets of borrowers. Additionally, Fannie Mae is going to have its lender-partners monitor loans that are delinquent that are owned by Fannie Mae and point out those that need to be examined.
Almost one out of four home owners who have a mortgage owes more than the current value of their home. Approximately 12 percent of all defaults on mortgages during this past February, 2010 were "strategic defaults".
According to the new requirements, borrowers who are unable to document that they were experiencing extenuating circumstances or prove that they attempted, along with their lender, to avoid the foreclosure, will not be able to get a new loan for seven years. Those who are able to prove financial hardship or who tried to work things out with their lender may have to wait for just three years before getting a new mortgage.
