Jingle Keys Revisited
If borrowers having trouble in this housing crisis have plans of using the jingle mail method of walking out on their mortgages, they better think longer before making that step. You most certainly will feel the pain. Fannie Mae has created new guidelines for all lenders pointing to those who walk away from their foreclosure problems. Unless homeowners can prove extenuating circumstances, they will not be able to get another mortgage from Fannie Mae for at least five years. If the homeowner provides the required documentation, the moratorium is three years.
Freddie Mac, Fannie Mae’s competition, states that foreclosures stain credit files for at least seven years, and ten years or more if judgments are won. Freddie Mac is now actively going after some walk away borrowers “to preserve our deficiency rights.” Borrowers with a foreclosure on their credit file will be required to make a ten percent down payment with a credit score of at least 680.
People not facing foreclosure whose mortgage payments are so high their homes aren’t appreciating are reasoning they are throwing good money after bad even if they can still afford the payments. They don’t stop to think that every down market eventually goes up and they are one of the lucky people who can keep their home in this crisis. They give up anyway.
Many people are making a bundle off borrowers facing foreclosure with web sites promising to keep homeowners in their homes for at least eight more months. What’s the catch? A fee of $895.00 for a custom plan. They also promise to fix your credit with legal credit repair to improve your scores.
Well, the only way to improve your credit score is to pay off any outstanding bills, and keep your house if at all possible. The truth is no one can clean up your credit or promise you’ll be able to buy a new home in a few years. A foreclosure in viewed by all types of lenders including credit cards, retail stores, renting, insurance, employment, auto loans, etc. as a terribly serious event that will affect all forms of credit for the next seven years or more.
Those who work with their lender to obtain alternative methods to avoid foreclosure are much better off than those who walk away. People willing to do whatever it takes to keep their homes also keep their credit files intact. Lenders down the road will be more sympathetic, and willing to extend more credit. Those who walk away face bankruptcy, have nothing forgiven, and may get huge tax bills from the IRS for the amount of the home loan they never repaid. And no company will feel sympathetic to someone who mailed their keys back to the lender after living in the house for several months free. Any future loans with Freddie Mac or Fannie Mae asks if the borrower has ever had a home loan that was foreclosed.
There’s no way to get out of the truth.
If you can afford to make those payments even though you’re paying more than the house is worth, keep it. The market will eventually stop the downward spiral. If you can’t afford to keep up the payments, do all you can to work with your lender. At least you will get more sympathy and more possibilities down the road when you’re able to start over again.
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