In a bid to perhaps “move things along,” Fannie Mae issued servicing standards for delinquent mortgages.
Under the new rules, servicers must achieve “quality right party contact” with homeowners during the first 120 days of delinquency.
In other words, meaningful contact must be made, and servicers must find out why the borrower is delinquent, assess their ability to make mortgage payments, and educate them about foreclosure prevention options.
“During the first 120 days of delinquency, homeowners will be contacted both verbally and in writing to complete a mortgage modification or other solution to remain in the home, or enter into an arrangement to exit the home without a foreclosure,” the release stated.
Foreclosure Timelines Will Get Quicker
You may have heard about some homeowners “squatting” in their homes for five years. Well, that’s about to get a whole lot shorter going forward.
Servicers will be required to follow clear timelines for referring delinquent mortgages to foreclosure status.
In short, once 120 days of delinquency have passed, the foreclosure process will begin, meaning loan servicers won’t be able to delay things to the detriment of mortgage investors.
Of course, that could lead to a flood of foreclosures on the market, pushing already-fragile home prices lower, but it could also mean a quicker recovery.
Incentives for Early Resolution
Fannie Mae will also provide incentives to servicers who complete loan workouts early on and charge fees when servicers fail to make proper contact.
Additionally, fees may be charged for servicers who don’t process foreclosures in a timely manner.
Read more: How does foreclosure affect your credit?