Fannie Mae Gets Tough on Borrowers Who Walk Away

I saw an article this morning about Fannie Mae and its new efforts to punish borrowers who walk away from their mortgages. They are extending the time you can get a new federally backed mortgage to seven years and also identifying borrowers to purse them for deficiency judgments.

This article appeared on MSNBC this morning. The article says that borrowers who do not try in good faith to find an alternative to foreclosures but have the ability to pay are being targeted by this new policy.

The article also says:

“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.”

Fannie and Freddie were created by Congress to buy mortgages from lenders and package them into bonds that are resold to investors. Together, they own or guarantee almost 31 million home loans worth about $5.5 trillion. That’s about half of all mortgages.

The wave of foreclosures affecting Fannie and Freddie loans has caused a major problem for the U.S. government, which effectively guarantees the loans.”

Christine here: I get that Fannie Mae is losing its ass to foreclosures. The US Government now owns a large number of foreclosed homes and there are more foreclosures coming. I understand that this is a business decision for Fannie, because they are hurting.

I also understand why the government doesn’t want to interfere in the foreclosure mess. I personally don’t think we want our government to interfere with private businesses. (I don’t want them to tell me how to run my business.) However, it seems to me that the government is indirectly going after homeowners with this policy.

I understand that there’s backlash against people who walk away from mortgages. However, until the servicers of all of these loans get real and give homeowners some meaningful assistance, these types of policies are useless. If Fannie wants to encourage people to work out a meaningful solution to their foreclosure problem, why aren’t they putting financial pressure on their servicing companies to work things out with the borrower instead of pushing them to foreclosure?

I wonder about the people at Fannie who put this information out. Have they been living under a rock? This policy is useless and I don’t know how they are going to be able to pursue anyone for a deficiency judgment. This would mean they’d have to prove they have or had the right to enforce the Note in the first place. If they are going to pursue a deficiency, why aren’t they prosecuting foreclosures now in their own name?

I could go on and on about this…but this is another good reason to get a loan audit and an expert witness declaration if you are thinking of fighting a foreclosure or are worried about being pursued for or have already been sued for a deficiency judgment.

Got questions? Send me an e-mail: christine@desertedgelegal.com.

DISCLAIMER:

****CHRISTINE SPRINGER IS NOT A LICENSED ATTORNEY. THIS BLOG IS COMPRISED OF HER OPINIONS, OBSERVATIONS AND INTERPRETATIONS AND IS NOT INTENDED TO BE CONSTRUED AS LEGAL ADVICE. PLEASE CONSULT WITH AN ATTORNEY BEFORE RELYING ON OR TAKING ANY ACTION BASED ON THE INFORMATION IN THIS BLOG.****

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