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More good news from Freddie Mac (FHLMC) (and Fannie Mae (FNMA) this week:  both of these mortgage monsters are going to be implementing new policies to help people who are stuck in mortgages that are much higher than the current market value of their homes (“underwater mortgages”).  This week, it was announced that Fannie Mae and Freddie Mac are recognizing the problem of being underwater on your mortgage – they are going to allow some mortgage home loan borrowers who are current on their mortgages to get to swim away: meet their conditions, and give up the property and move on with their life.

How?  Through a Deed in Lieu of Foreclosure.

Freddie Mac and Fannie Mae, the two government rescues now overseen by the Federal Housing Finance Agency (FHFA), are going to allow some home owners in Florida and elsewhere in the country to walk from their mortgage obligations without paying off the home loan in full.

Who qualifies? According to news reports:

  1. those who are current on their mortgage or less than 90 days behind on their mortgage payments;
  2. those who have a home loan with a balance that is higher than the value of the property;
  3. those who can’t accomplish a short sale of the home (for whatever reason); and
  4. those who can demonstrate an accepted reason to move from the home: illness, death of spouse, or job relocation, for example.

According to the new Rules, as of March 1, 2013, some mortgage home loan borrowers can apply for a “deed-in-lieu” and if accepted, then they can (* poof!! *) make the difference between the mortgage amount and the market value of the home simply disappear.  No lender will be suing them for a deficiency judgment based on this amount.


Larry Tolchinsky’s Tip:   This has the possibility to help a lot of people.  However, it’s important to understand what a “deed in lieu” is, under Florida law.  What a “deed-in-lieu-of-foreclosure” involves is the borrower signing over title to the property to the lender without either side going through formal foreclosure proceedings.  The home owner signs some paper, and the home is now the property of the Bank.

It’s a transfer of real estate ownership that sidesteps all that foreclosure procedure: no lawsuit, no foreclosure sale.  However, it’s not a walk in the park and advice from a Florida mortgage defense lawyer can be invaluable in these cases.  Consider this:

1.  A deed in lieu of foreclosure will appear on your credit reports (FICA Scores) just the same as a formal foreclosure.

2.  Also, the fine print needs to be read here before anyone jumps at the chance here:  for example, do get the Deed in Lieu Deal from Fannie Mae or Freddie Mac, you may have to fork over up to 20% of your personal assets (retirement accounts are not considered here) in order to pay down some of the mortgage balance.  This will be asked of you if you have certain financial conditions that the federal government considers makes you a contender for paying off part of that mortgage lump sum in order to get a Deed in Lieu and thereafter, to walk away.

To determine if your mortgage is connected to Fannie Mae or Freddie Mac, check online here:

Do you have questions or comments? Then please feel free to Chat with Larry in the comments below, at, or (954) 458-8655. If you have a specific situation, please call or email Larry because he can’t answer specific fact questions in general comments. He’s happy to take your call.

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