Limits on Foreclosure Sales Stir a Debate

June 14, 2014
Wall Street Journal 
mortgage lending news
Nonprofit groups and mortgage industry interests are butting heads over policies that restrict who can participate in short sales and foreclosure sales, and under what circumstances.

In particular, consumer advocates are critical of Fannie Mae and Freddie Mac's rules dictating that foreclosed properties cannot be re-sold to former owners unless they can settle the full unpaid loan balance in addition to accrued interest in expenses. The firms also decline to participate in short sales in which the buyers have a relationship with the delinquent homeowner. Nonprofits complain that the policies keep them from helping distressed borrowers from losing their homes -- such as by purchasing the property from Fannie or Freddie and selling it back to the former owner on more affordable terms -- and also contribute to vacancies that lead to blight and lower property values.

While mortgage experts do see some value in the policies, which they say protect the housing market from fraud so that investors will continue to invest in it, they suggest that the rules could be relaxed a little.

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