Fannie Gets Self-Righteous

[don]

Fannie Mae to penalize homeowners who walk away
By EILEEN AJ CONNELLY (AP) –

WASHINGTON — Government-sponsored mortgage purchaser Fannie Mae is trying to encourage distressed homeowners to find alternatives to foreclosure by banning those who walk away from getting new loans for seven years.

Troubled borrowers who do not try in good faith to work out a deal, but have the capacity to pay, are targeted by the policy announced Wednesday.

"Walking away from a mortgage is bad for borrowers and bad for communities and our approach is meant to deter the disturbing trend toward strategic defaulting," said Terence Edwards, executive vice president for credit portfolio management.

A strategic default occurs when a homeowner stops making payments on a mortgage despite being able to do so. It has become increasingly common in communities where housing values fell sharply and homeowners are "underwater," or owe more than their houses are worth.

Fannie Mae said that in locations where the law allows, it also plans to take legal action to recoup outstanding mortgage debt from borrowers who strategically default. The company plans to instruct its servicers to monitor delinquent loans facing foreclosure and recommend cases to pursue for such judgments.

A spokesman for fellow government-backed mortgage buyer Freddie Mac said its current policy requires at least a five-year wait. Freddie Mac will "take a close look" at the new Fannie policy, said spokesman Brad German. "We'll consider it in light of current market conditions in order to manage our risk as effectively as possible."

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Dante's Inferno- Circle 8...Hypocrites

[don]

Re: Fannie Gets Self-Righteous

"The mortgage giants have been de-listed and should now be liquidated."
Forbes

[mmr]

Re: Fannie Gets Self-Righteous

Somehow, I don't think Fannie or Freddie will be around to threaten anyone for seven more years. (Even if they are, I'm sure some creative mortgage broker has already figured out a way to make sure that even strategic defaulters can get the new mortgages to which they're entitled. After all, home ownership is your right as an American. )

[swgprop]

Re: Fannie Gets Self-Righteous

Government-sponsored mortgage purchaser Fannie Mae is trying to encourage distressed homeowners to find alternatives to foreclosure by banning those who walk away from getting new loans for seven years.

"Government-sponsored", what a joke. How about "taxpayer owned under protest"?

Troubled borrowers who do not try in good faith to work out a deal, but have the capacity to pay, are targeted by the policy announced Wednesday.

And exactly how will they determine if there is capacity unless the borrower willingly provides information? And does it matter? There has always been roughly a 7 year credit hit from a foreclosure. The relief valve has historically been FHA eligibility within a couple of years given prudent payment patterns subsequent to the default.

"Walking away from a mortgage is bad for borrowers"

Umm, no, not really. Walking away from a mortgage is bad for the lender. Period. Borrowers walk away from $3000 mortgage payments into the arms of the relief bestowed via $1200 rent payments.

The company plans to instruct its servicers to monitor delinquent loans facing foreclosure and recommend cases to pursue for such judgments.

Yes, this is a concern for borrowers in judicial foreclosure states that allow for deficiency judgments. But this is for the most part an empty threat. Your mileage may vary.

Both companies plan to delist their shares from the New York Stock Exchange because they don't meet listing requirements that they remain above $1 per share.

Because they are failed and corrupt organizations, mired in FIRE doctrine. Shut them down.

Over the next few years strategic defaults will run rampant. The effort to mitigate them on the part of the GSE's will fail until principal reductions become the remedy du jour.