Fannie Mae to Fix Glitch that Harms Some Consumers’ Credit

Fannie Mae to Fix Glitch that Harms Some Consumers’ Credit


Because of a shortcoming in Fannie Mae’s software, many homeowners who sold their homes through short sales have suffered undue harm to their credit and additional penalties preventing them from attaining new mortgage loans for several years, according to Sen. Bill Nelson (D-Florida), who has been working toward a solution to the problem.

Short sales were relatively uncommon prior to the housing crisis, but with so many homeowners slipping underwater, short sales have served as a solution for many who are unable to pay their mortgages, with the added benefit of helping lenders and investors mitigate their losses.

Fannie Mae’s software reportedly does not offer a “short sale” label, and therefore short sales have been labeled as foreclosures in the GSE’s system.

While short sales may have some effect on credit, foreclosures are more harmful. Furthermore, after a foreclosure, an individual cannot obtain another mortgage loan for seven years in most cases.

After a short sale, an individual has to wait only two years before applying for a mortgage loan.

Florida suffered some of the highest foreclosure and underwater rates in the nation during the housing crisis, and Sen. Nelson has taken interest in the misrepresentation that has harmed many of his constituents.

Nelson worked with the Consumer Financial Protection Bureau and Sen. Claire McCaskill (D-Missouri) to find a solution.

According to Nelson’s office, Fannie Mae will revise its software and correct the problem by November 16.

“Regardless of the cause, I’m glad Fannie Mae is fixing the problem,” Nelson said. “You can’t punish homeowners who went upside down solely because of the economic downturn and loss of value in their home.”

Consumers whose short sales have been mislabeled as foreclosures can visit the CFPB website and submit a complaint.

The CFPB also encourages them to obtain a letter from their former lender explaining that their home was not foreclosed but rather sold through a short sale. The individual can then present this letter to lenders when applying for home loans or other credit in the future.

  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: