Fannie Mae: Walk Away and You Will Pay
Dare I say it? “What took you so long??”
An announcement from government-owned mortgage giant Fannie Mae warns: “Defaulting borrowers who walk-away and had the capacity to pay or did not complete a workout alternative in good faith will be ineligible for a new Fannie Mae-backed mortgage loan for a period of seven years from the date of foreclosure.” I have to ask: Why only seven years? Up the ante! Look, I understand that a lot of folks are sitting on overwhelming bundles of negative equity in the form of four walls. A very credible argument can be made that a bad investment should not be a jail term. However, a lot of the housing crash was based on a fundamental change in attitudes toward home ownership, i.e. that a home is an investment before a dwelling. The pendulum needs to shift back, not all the way, but more toward the traditional use of home: A place to live, not an A.T.M. “Fannie Mae will also take legal action to recoup the outstanding mortgage debt from borrowers who strategically default on their loans in jurisdictions that allow for deficiency judgments,” notes the press release.
I’m wondering why they haven’t been doing that all along? My guess is they simply don’t have the legal resources available to handle such a huge job…which brings me to my final thought: If the mortgage walk-away issue is big enough for Fannie Mae to get this tough, then why have Administration officials been telling me over and over that “it’s just not that big an issue.” Seriously, I’ve done several interviews over the past year, bringing it up over and over, and they just seem to want to sweep it under the rug.
I guess the rug is getting a bit too bumpy.
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