Homeowners who were behind on their home purchase loan payments are expecting to receive good news in the coming weeks. Under an act approved by the federal regulator of mortgage-finance corporations Fannie Mae and Freddie Mac, thousands of homeowners who owe more than the worth of their properties and are behind in bill payments will be eligible to get their mortgage balances absolved.
Wall Street Journal staffer Joe Light wrote that Fannie Mae and Freddie Mac did not make mortgages, but rather bought them from lenders and wrapped them in guaranteed securities. They will forgive principal only in clients after they determined the corporation would lose less money. With that option, the foreclosure or other foreclosure-prevention methods would also be considered. In addition, the new act would likely be applicable to mortgages whose outstanding principal balance is below a specific dollar amount, according to a report from the Wall Street Journal.
As it stood, less than 50,000 underwater homeowners were eligible for the new Fannie Mae and Freddie Mac act. CoreLogic, a real estate data firm, stated that there were an estimated 4.3 million underwater borrowers in the year 2015.
While past policymakers had argued over minimizing the principal of mortgages under Fannie Mae and Freddie Mac, many believed the act's restrictions did not have a significant effect on the national housing market, according to a report from the Mortgage Professional America.
Moody's Analytics chief economist Mark Zandi said that it made economic sense to implement for everybody involved. It kept some stressed homeowners in their houses, reduced losses to Fannie Mae and Freddie Mac and taxpayers. It also helped buoy hard pressed districts.
Fannie Mae and Freddie Mac critics, however, argued that it gave the wrong impression to homebuyers that such actions could be used in future scenarios, including a moral issue of forgiving debt for selected homeowners and not everyone.
