Beginning in July, Fannie Mae will allow financially troubled home owners to complete a “deed in lieu of foreclosure” or a short sale and be eligible to apply for a new Fannie-backed mortgage in two years.

Currently, borrowers who have completed a deed-in-lieu must wait four years to apply for a loan that Fannie will purchase. Home buyers who go through foreclosure must wait five years.

All these waiting periods can be reduced further, if the potential buyer can show extenuating circumstances. "We are beginning to think about post-recession, how you address borrowers who became unemployed through no fault of their own ... and now deserve the right to re-enter the housing-finance system," said Federal Housing Association Commissioner David Stevens.

Source: The Wall Street Journal, Nick Timiraos (04/26/2010)

Rare insight into how a foreclosure will affect your credit score:

30 days late: 40 - 110 points

90 days late: 70 - 135 points

Foreclosure, short sale or deed-in-lieu: 85 - 160

Bankruptcy: 130 - 240

 

Source: CNN

Lenders are selling second mortgages and home-equity lines in default to collection agencies that have the right to collect this money potentially for decades.

"It's a big business, and investors are coming out of the woodwork," says Sylvia Alayon, a vice president for Consumer Mortgage Audit Center, which analyzes mortgage documents for lenders, advocacy groups, and attorneys.

People who cashed out refinances, or had part of their mortgage debt forgiven when they sold their homes through short sales, will probably owe the IRS a big payback.

In 2007, Congress passed the Mortgage Forgiveness Debt Act, but that doesn’t let everyone off the hook.

Here are exceptions to the rule: