- 3 min read
- Mortgage Release is an alternative to foreclosure or short sale.
- Homeowners may qualify for $3,000 in assistance.
- Expect to submit a large amount of documentation to qualify.
Fannie Mae's 'Mortgage Release' is a Deed in Lieu of Foreclosure
Fannie Mae announced new rules for distressed homeowners who want to walk away from homes that are worth less than the balance of their mortgages.
The process is called a "mortgage release," and it allows homeowners who cannot afford their monthly payments to transfer their home’s title to Fannie Mae in exchange for the chance to live in their homes for three months for free or lease the property for up to a year. In law, the procedure Fannie Mae calls mortgage release is a deed in lieu of foreclosure.
A mortgage release / deed in lieu of foreclosure is similar to a short sale, with one significant difference. In a short sale, the lender agrees to allow the homeowner to sell the property for less than the balance of the home loan. In a mortgage release / deed in lieu of foreclosure, the homeowner signs a contract that gives the property over to the lender. In both a short sale or mortgage release / deed in lieu of foreclosure, any deficiency balance, which is the shortfall between the loan balance and the sale price, is negotiated by the lender and homeowner. In some situations, Fannie Mae will forgive the deficiency balance.
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What Fannie Mae Considers an Eligible Hardship
Fannie Mae considers the following 10 events as eligible hardships:
- Reduction in income beyond the homeowner’s control
- Increase in housing expenses beyond the homeowner’s control
- Divorce or legal separation
- Death of a borrower or death of either the primary or secondary wage earner
- Long-term or permanent disability
- Distant employment transfer
- Business failure
A description of each is found in Fannie Mae’s Uniform Borrower Assistance Form 710 (PDF).
Homeowners who want a mortgage release must complete an application called a Borrower Response Package. The application is sent to the homeowner’s mortgage servicer. The servicer reviews the borrower’s financial situation and determines if the home is worth less than the balance of the loan. The servicer determines whether the borrower can afford partial payments. If the mortgage servicer finds the homeowner has more than $10,000 in savings and investments, excluding retirement accounts, the lender must request a partial payment from the homeowner.
The servicer must also calculate the homeowner’s debt-to-income ratio to learn if the borrower can afford to sign a promissory note and make lease payments or payments on the deficiency balance.
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$3,000 of Good News
Under Fannie Mae's mortgage release program, servicers may offer homeowner's up to $3,000 in assistance if the homeowner is not required to sign a promissory note to repay the deficiency balance.
To learn if your loan is owned by Fannie Mae, access the Fannie Mae Loan Lookup page.
The Latest on Mortgage Rates
Mortgage rate fluctuations should come as no surprise. If you are buying a home or refinancing your existing mortgage, it is important to stay informed about the current mortgage rates.
Mortgage rates February 14, 2024
According to Freddie Mac, the 30-year mortgage rate for the week of February 14, 2024 stands at 6.64%. This 13 basis points increase from the previous week's rate.
Additionally, Freddie Mac reports that the 15-year mortgage rate for February 14, 2024 is 6.12%, indicating a 22 basis points increase from previous week’s rates.
Note: A basis point is equal to one-hundredth of one percent (0.01%). In numerical terms, if the mortgage rate changes by 20 basis points, it means the rate has changed by 0.20%.
What does the mortgage rate mean for you?
Mortgage rates play a vital role in determining your monthly payment. Let's take a look at the avergage interest rates (APR) for February 18, 2024 based on Zillow data for borrowers with a high credit score (680-740) in the United States:
- For a 30-year conventional loan, the interest rate is 7.03%.
- If you opt for a 15-year conventional loan, the interest rate stands at 6.19%.
Using the rates mentioned above, a $279,082 30-year-year mortgage would result in a monthly payment of $1,862. On the other hand, a 15-year mortgage would require a monthly payment of approximately $2,384.
Simplify your mortgage journey: Shop around and get pre-approved today!
To make the home-buying or refinancing process a breeze, we highly recommend shopping around for mortgages and getting pre-approved. So, why not Check Out mortgage rates now for the best options available.