(snip)"Additionally on Friday, Fannie Mae tightened up its rules on workouts and foreclosure,although this won’t go into effect until June, 2007. The rules included a provision requiring seriously delinquent loans to be repurchased from MBS pools after two years. In addition:
* Fannie is amending its requirements to require that foreclosure be initiated within 200 days of delinquency. In the past, Fannie had not provided servicers with a specific outside date by which foreclosure must begin.
* Forebearances may only granted for no more than four contiguous months
* Repayment plans must bring borrowers current within 18 months from start of adjusted payments
* Any loan past due for 24 months must be repurchased from its MBS pool.
Of course that ASSumes the originator is even around to take it back, or for that matter the often obscure default insurer at the other end of the fax."(snip) from
Obviously, Fannie Mae is attempting to re-transfer some of the 'bankruptcy pain' of belly up mortgages away from itself and back on the originating lenders - creating financial obligations on the originating lenders to 'repurchase' the belly-up subprime loans they sold. Not only is this likely to bankrupt a whole slew of originating lenders, but it is going to vastly tighten up future mortgage lending creditworthiness criteria for would-be new mortgages / refi's - and particularly so where subprime credit is involved.
Also, the new criteria that all 'repayment plans' must bring delinquent borrowers current within 18 months is virtually guaranteed to be the source of a slew of additional personal bankruptcies - because mortgageholders who presently cannot afford to make regular payments simply cannot afford making the even larger repayments necessary to get current in an 18 month period ! Thus, in conjunction with the 200 day foreclosure rule, the bankruptcy courts are going to be very busy late next year !



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