Fannie Encourages Opt-In to MS Program

Fannie Mae is encouraging lenders and servicers to participate in a Mississippi housing assistance program, despite some legal concerns about the subordination agreements they have to sign to work with homeowners receiving the assistance grants."Servicers that opt-in have our consent to subordinate our lien to the required covenant and will have no liability to Fannie Mae for the consequences of such subordination," the government-sponsored enterprise says in a letter to lenders and servicers. The deadline for signing up for the state housing program is April 21. Homeowners can receive up to $150,000 in grants to rebuild homes that were destroyed or damaged by Hurricane Katrina. By participating, lenders and servicers will help homeowners with the execution of the closing documents for the grants. Lenders are assured that the loan will be made current and taxes will be paid. But after that point, the homeowner has complete control of the funds and there is no guarantee or requirement that the assistance be used to repair the property or pay down the mortgage.