Fannie Orders Chinese Drywall Forbearances

Fannie Mae will institute a national policy to provide relief for homeowners who have toxic drywall in their homes. Under the company's broad "Unusual Hardships" policy, Fannie Mae will direct its servicers to provide qualifying borrowers who have problem drywall up to six months of forbearance on their mortgage loan payments. The company will also instruct servicers to minimize the derogatory credit impact for borrowers who are current on their loans and complying with the terms of the forbearance. "This relief is intended to help borrowers who need payment flexibility as they take steps to mitigate problems with problem drywall," said Terry Edwards, executive vice president. "The issue potentially affects thousands of homeowners in a number of states, and we want to support those who are responsibly trying to honor their mortgage obligation in good faith while correcting the problem and protecting the health and safety of their families." Servicers will be required to document and evaluate each borrower's circumstances on a case-by-case basis, and require a property inspection to confirm the existence of the problem drywall. The servicer may offer forbearance terms initially for no more than six months. Extended terms require Fannie Mae approval. Fannie Mae's "Unusual Hardships" policy will go into effect in mid-July.