Fannie Mae says it will start penalizing "strategic defaulters" who walk away from Fannie Mae insured loans. Strategic defaulters are borrowers who walk away from mortgages they can afford to pay.
"Starting in October, Fannie Mae says, strategic defaulters will be disqualified for new Fannie Mae-
backed loans for seven years after their foreclosures. Fannie also says it will go to court
where it can to recoup outstanding mortgage debt from borrowers who strategically default.
Under a bill that's passed the House and awaits Senate action, the Federal Housing Administration
would be barred from insuring mortgages for those who previously ditched a mortgage they had the
ability to pay. Get-tough policies are forming at the same time that about a quarter of mortgage borrowers owe more than their homes are worth. Fannie Mae buys about 40% of all mortgages and packages them for resale to investors. The FHA insures about 30% of home mortgages." USA Today
Apparently Fannie Mae will look to see if defaulters still have access to credit and are current on other debts. I do not see how this will work as a practical matter. But then again, the yearly IRS return is so complicated and non intuitive, we may all be in for a bunch of bureaucratic paperwork and reporting that will make this one more obstacle for home ownership.
This bill has passed the US House but has not passed the Senate so hopefully there will be significant changes to the bill including an incentive for Short Sales that actually works. We need to clear the inventory of bad loans but we also need to use some common sense in our public policy.
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Common Sense? Do they ever use it. Hopefully they'll speak to some active REALTORS before they decide to make the market worse!
Thanks for sharing!
Thanks for sharing. Lenders will have to loosen up their standards or soon no one will get a loan at all. In Florida, 25% of borrowers are considered to be high risk with a credit score below 600,
The agencies are going to have to come out with strong stances to limit the number of home owner's from just walking away. We have enough foreclosures on the market as it is, let alone adding to it the homes of owners who really can afford to pay.
To Joe's comment, credit scores below have always been considered very high risk even back in 2005-2007 market. At that time, most were called subprime borrowers.