Question: What’s the penalty for walking away from a mortgage?

Answer: Fannie Mae has issued a new rule which says “defaulting borrowers who walk away and had the capacity to pay or did not complete a workout alternative in good faith will be ineligible for a new Fannie Mae-backed mortgage loan for a period of seven years from the date of foreclosure.”

The company says it will seek deficiency judgments for unpaid balances when possible. The catch, of course, is that about one-third of all states will not allow residential deficiency judgments.

However, Fannie Mae also says that “borrowers facing hardship who make a good faith effort to resolve their situation with their servicer will preserve the option to be considered for a future Fannie Mae loan in a shorter period of time.” For those who accept a loan modification, short sale, or a deed-in-lieu of foreclosure the “shorter period” can be as little as two to three years.

In essence, some borrowers will be able to get a mortgage in about 24 months if they play by lender rules. Also, look for many lenders to adopt the Fannie Mae standard.

Question: If we’re facing foreclosure how much should we expect to pay for mortgage modification assistance?

Answer: Nothing. There’s no charge to participate in the government’s Making Home Affordable program. Just go to the Web site, makinghomeaffordable.gov.

There’s no charge to call a HUD counselor. Find one at: www.hud.gov. As HUD explains, “foreclosure prevention counseling services are provided free of charge by nonprofit housing counseling agencies working in partnership with the Federal Government. These agencies are funded, in part, by HUD and NeighborWorks America. There is no need to pay a private company for these services.”

Many states have free owner-assistance programs. As a place to start, contact your state attorney general. There’s a list of individual state links at: www.naag.org/current-attorneys-general.php.

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