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Fannie Mae Mortgage Release

Fannie Mae Mortgage Release
Mark Cappel
UpdatedMay 28, 2024
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    3 min read
Key Takeaways:
  • 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.

Quick Tip

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What Fannie Mae Considers an Eligible Hardship

Fannie Mae considers the following 10 events as eligible hardships:

  • Unemployment
  • 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
  • Disaster
  • Distant employment transfer
  • Business failure
  • Other

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.

Quick Tip can help you find your best rate on a home loan refinance. with rates at historic lows, it pays to apply now.

$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.

Quick Tip

To learn if your loan is owned by Fannie Mae, access the Fannie Mae Loan Lookup page.

Mortgage market: a pulse check

It is expected that mortgage rates are subject to change. Homebuyers and those refinancing their mortgages should pay close attention to the latest mortgage rate

Mortgage rates April 10, 2024
According to Freddie Mac, the 30-year mortgage rate for the week of April 10, 2024 stands at 6.88%. This reflects a 6 basis points increase from the previous week's rate.
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%.
Additionally, Freddie Mac reports that the 15-year mortgage rate for April 10, 2024 is 6.16%, indicating a 10 basis points increase from last week’s rates.

What does the mortgage rate mean for you?
Mortgage rates are one of the key factors that determine your monthly payment. Here are avergage interest rates (APR) for April 14, 2024 based on Zillow date for borrowers with a high credit score (680-740) in the United States:

  • 30-year conventional loan is 7.09%
  • 15-year conventional loan is 6.29%
    Using the rates mentioned above, the monthly payment for a $279,082 30-year-year mortgage would be $1,874. A 15-year mortgage would require a monthly payment of around $2,399.

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.