Financially pressed homeowners who voluntarily surrender their homes instead of going through foreclosure could buy a new home in as little as two years under new guidelines set by Fannie Mae.

The new rules, which take effect July 1, would enable homeowners who opt for a short sale or deed-in-lieu of foreclosure to qualify for a new mortgage much faster than the five years it would normally take after a foreclosure.

The goal is to encourage homeowners who are unable to keep up with their mortgage payments or qualify for a loan modification to seek other alternatives to their situation short of foreclosure. The foreclosure process itself is costly for lenders, who recover considerably more of the value of the property through a short sale or deed-in-lieu of foreclosure.

As reported by the Washington Post and Wall Street Journal, homeowners would need to be able to come up with a 20 percent down payment to be able to qualify for a new mortgage within two years of surrendering a home through a short sale or deed-in-lieu. Those who were able to prove extenuating circumstances, such as losing a job or suffering a medical crisis, could be able to put only 10 percent down.

Freddie Mac requires a four-year waiting period after a short sale or deed-in-lieu before allowing a new mortgage, and five years after a foreclosure. That period may be shortened to two years after a short sale or deed-in-lieu if there are extenuating circumstances, however, and three years after a foreclosure.

Despite the new guidelines, former homeowners seeking to obtain a new mortgage may still face a considerable hurdle in the form of damaged credit caused by missed payments leading up to the surrender of their former home, or by the short sale or deed-in-lieu itself. As many lenders report short sales and deeds-in-lieu to credit agencies as unfulfilled debt obligations, borrowers may still suffer a heavy blow to their credit rating that can take several years to recover from.

Published on April 28, 2010