Information from The Wall Street Journal
At issue are rules designed to discourage borrowers from intentionally defaulting on their mortgage in the hope of buying it back at a lower price—and leaving Fannie, Freddie, investors and banks with losses.
The mortgage giants also require that short sales—where homeowners are allowed to sell a home at a price that doesn’t cover the mortgage outstanding—be “arms length” transactions, in which buyers have no relationship with the delinquent homeowner.
Critics around the country, including nonprofit groups like Boston Community, say the foreclosure-sale and arms-length rules undermine their work seeking solutions to help delinquent borrowers keep their homes. They say the rules encourage homes to lie vacant, blighting local neighborhoods and hurting property values, and have filed lawsuits against Fannie and Freddie.
