Why We Chose 'Mortgage Release'
Apr 14, 2014
Paddy and Vickie moved to southwest Florida in 2006—during Florida's building boom. They financed a new $230,000 home and took out a second mortgage for their down payment.
Although the development was 35 miles from Paddy's employer, it was a location they felt they could afford. Still, they stretched financially from the get-go. "But we never missed a payment," Paddy notes.
Home prices in Florida steadily declined after 2009, and so did the value of their home. In spite of adding a swimming pool and making other improvements, by 2012 Vickie and Paddy's home value had dropped to $93,000, leaving the couple "underwater" on their mortgage (owing more than the home was currently worth).
"At our age, it was starting to feel like we would never get out from underneath our mortgage loan payments," says Paddy.
The couple was embarrassed and frustrated, but knew they had to take action. They found Fannie Mae's Know Your Options website, and determined their loan was owned by Fannie Mae. The website also pointed them to a HUD-approved housing counseling agency. After much hand-wringing on their part, and number-crunching by the housing counselor, all parties agreed Paddy and Vickie could no longer afford the home.
Securing agreement from their mortgage company for a Short Sale, they listed the home for sale. A Short Sale, also known as a pre-foreclosure sale, allows you sell your home for less than the balance remaining on your mortgage and use the proceeds to pay off your mortgage balance.
In their situation, though, the Short Sale stalled. "We endured six months of frustration, anger, depression, confusion and uncertainty, and we were no closer to being out from under the mortgage than we'd been before," Paddy recalls.
A Graceful Exit Is Possible
In the end, Paddy and Vickie cancelled the sale and returned to the Know Your Options website. This time they contacted a Fannie Mae Mortgage Help Center. "From that moment, we knew our case was in capable hands," says Paddy. "Our housing advisor intervened with the vast network of mortgage sub-servicers, keeping us in the loop and providing confidence and direction as we progressed through a Mortgage Release™," Paddy notes.
Mortgage Release allows homeowners to voluntarily transfer the ownership of their property to Fannie Mae in exchange for a release from their mortgage loan and payments. In Paddy and Vickie's case, Mortgage Release eliminated their $170,000 first mortgage and $40,000 second.
Mortgage Release offers three options: homeowners can leave immediately, stay in the home rent-free for up to three months, or pay market-based rent to stay for up to one year. Paddy and Vickie chose to leave immediately, although they returned to paint and clean. The pristine condition of their home when they turned over the keys qualified them for a cash incentive.
"For us, Mortgage Release was the best option, and we had a positive outcome...As much as we loved that old house, we're now in a much better situation, renting a home just blocks from where we work," says Paddy.