On Tuesday, the Federal Housing Financial Agency (FHFA) announced it would permit Fannie Mae and Freddie Mac to allow borrowers who have had their homes foreclosed to buy back their homes at market value even if they owe more. The change in policy comes following criticism from consumer advocacy groups and lawmakers who sought relief for debt-ridden homeowners. Prior to this, borrowers who went into foreclosure were required to pay the outstanding mortgage balance before retaking possession of homes, even though anyone else could do so at market price. Advocates argued the previous policy encouraged homes to remain vacant, hurting neighborhoods and property values.
Martha Coakley, Massachusetts Attorney General, said,
While this is a step in the right direction, we encourage FHFA to further help families regain financial footing by permitting principal reduction and allowing all properties in the foreclosure process to benefit from this change to its buyback policies.”
The change will allow certain individuals who owe more than their homes are worth to cut mortgage debt. The policy applies to the 121,000 foreclosed homes currently recorded by Fannie Mae and Freddie Mac. Melvin Watt, director of the FHFA, as quoted in The Wall Street Journal, says,
This is a targeted, but important policy change that should help reduce property vacancies and stabilize home values and neighborhoods.”
Elyse Cherry, CEO of Boston Community Capital, confirms this policy change gives hope to those struggling to get back their homes and a way to strengthen the housing market.
Today’s move by the FHFA is an encouraging step in the right direction… In our experience at Boston Community Capital, permitting sales at fair market value is a just and sound strategy for helping the many underwater homeowners still seeking relief.”
While the new policy only currently applies to a limited number of homes, officials hope it will lead to future changes by the FHFA intended to help the large number of borrowers who owe more than their house is worth.
Read more here- “Fannie, Freddie Give Some Relief to Foreclosed Homeowners,” (Joe Light, The Wall Street Journal)