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The attitude of Fannie is contrary to the mood taken the Obama government in easing the foreclosure crisis
Article by Jessica Alberton
The attitude of Fannie is contrary to the mood taken by the Obama government in easing the foreclosure crisis – Real Estate – Foreclosures
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Fannie Mae and Freddie Mac together account for 30 million residential mortgages in America. Since 2008 September they have been virtually taken over by the government. Recently Fannie has threatened strategic defaulters with legal action if they walk away from underwater mortgages. This attitude of Fannie is contrary to the mood taken by the Obama government in easing the foreclosure crisis.
Of late strategic defaults have been increasing making the lenders anxious. But it is advantageous to the borrowers. When they stay on without making payments it means living without paying even rent for may be a year or even two. This is one of the biggest incentives to the borrowers.
Fannie has not given the details of the numbers of strategic defaulters. But its delinquency rate has been sharply increasing since the middle of 2007. At the start of this year it was 5.5%. Nearly one fourth of the house owners saddled with mortgages counting to nearly 11 million families have loans that are more than the worth of the property mortgaged. They are vulnerable to the temptations of strategic defaults. A real estate market on the ascendancy would encourage a good number of underwater borrowers to cling on but if the market continued to decline they would be tempted to stop paying.
Fannie Mae made its debut as an agency of the federal government in 1938. It became a private company in 1968 by the handiwork of Congress. Its special status allowed it to prosper, making for the good fortunes of its shareholders as well its executives. During the boom years Fannie overshot itself and bought loans of the purchasers who were ill qualified for these mortgages. As such it is overburdened with toxic loans and with its very existence at stake it is doubtful if it will be around to enforce its edict about not granting further loans to strategic defaulters within the next seven years.
Christopher F. Thornberg the principal of Beacon Economics had rightly predicted that the housing boom would one day get busted. He said that he could understand what Fannie was attempting to do and even had sympathy with it to some extent. He said that the thinking is rational to presume that any person running away from a mortgage commitment would in all likelihood do the same thing once again. Thus Fannie is naturally trying to rein in trouble prior to the damage worsening.
About the Author
Jessica Alberton, has been working on ForeclosureRepos.com studying the foreclosures market, helping buyers on the finer points of “>foreclosures in broward county.
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Jessica Alberton
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