Fannie Mae and Freddie Mac will institure a new policy in July to not include those houses built with Chinese drywall to impact the foreclosure process.

The drywall was used mainly in the southeast, i.e. Florida, Lousiana and Virginia and was imported folllowing hurricane Katrina. Nevada is not expected to be affected.

A CPSC-led task force studying the impact of the drywall said it is responsible for emitting a sulfur smell, corrodes metal pipes and makes some residents ill. The task force has further found that the only effective remediation of the drywall is complete removal and replacement of the drywall and the affected household components. That’s forcing homeowners to find alternative housing — at their own expense — while their homes are repaired.

“This relief is intended to help borrowers who need payment flexibility as they take steps to mitigate … 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.”

So, will this affect the actual foreclosure prices?

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