Mortgage-finance giants Fannie Mae and Freddie Mac will allow homeowners who have been foreclosed upon to repurchase their homes at market value even if they owe more, reversing a policy that prohibited such transactions.
“This is a targeted, but important policy change that should help reduce property vacancies and stabilize home values and neighborhoods,” said Mr. Watt, the chief of the Federal Housing Finance Agency.
Previously, someone who lost a home through foreclosure and wanted to buy it back from Fannie or Freddie needed to pay the full amount owed on the mortgage, even if the market value of the home was less. That was intended to take away the motivation for homeowners to intentionally default in order to get the balance of their mortgages reduced.
In effect, that meant Fannie and Freddie had two standards where they would be willing to sell properties they owned to a new buyer at market prices when they wouldn’t do so for the former homeowner.
“This is a ‘feel-good’ type of policy. It’s directionally helpful to a small number of homeowners that ran into trouble, but at the end of the day, I don’t look to this to have a major policy impact,” said Clifford Rossi, a finance professor at the University of Maryland.
via Fannie, Freddie Give Some Relief to Foreclosed Homeowners – WSJ.