Fannie Mae said Wednesday that borrowers who default despite having the capacity to pay or did not complete a workout alternative in good faith won't be eligible for a new Fannie Mae-backed mortgage for seven years from the date of foreclosure. The move is aimed at encouraging borrowers to work with their servicers and pursue alternatives to foreclosure. Fannie Mae also plans to take legal action to recoup the outstanding mortgage debt from home owners who strategically default on their loans in jurisdictions that allow for deficiency judgments. http://www.marketwatch.com/story/fannie-mae-ups-penalty-on-strategic-defaulters-2010-06-23-1435340
So 8 years later strategic defaulters can do it all over again? Why give them a second chance? We lost enough money on them the first time. And I say "we", because courtesy of our criminal government we are all guaranteeing Fannie Mae's debt with our tax dollars.
there is nothing wrong with strategic default, it's simply a contract like any other. The agreement is the bank lend you the money, you make your payment, and the house is the collateral. If you dont pay, bank takes the house. It's up to the bank to do the due diligence on the current/future value of the collateral to determine their risk BEFORE signing the contract and give you the loan. If the contract is no longer in your favor, then why shouldn't you walk away per the agreed upon terms - handing over the collateral. There is no moral hazard, there is no term in the contract that says the debter needs to cover the losses if the market value of the collateral has declined. If the market value went up, but you cant make your payment, will the bank not take your house or give you the profit? All this morale harzard is just pure bullshit, now they are trying to make laws out of it to unfairly lock in 1 side of the contract, after it's signed and the ink dried..
What I don't understand is why must we as a nation feel so bad about plummeting home prices? If home prices were "affordable" to begin with, there wouldn't be any need for all these foreclosures. The argument against foreclosure is that it would further erode prices of the entire neighborhood. That's horse shit. I say let it fall even further. We need to redefine what a house really means in our lives and stop treating it as an ATM. Home is a sacred gathering place to eat, sleep, and do everything in between. As such, it should be treated with respect, a notion that is completely alien in our money-crazy society.
Exactly what I have been saying all along. Prices have been held up with stimulus money and huge amounts of tax credits, if they would let the market do its own thing without propping it up every time it takes a small dip prices would be at reasonable levels. Prices are still overvalued and need to drop even more before there is a bottom. It was alright for prices to bubble over, but now that prices have stopped rising they have intervened in the process causing prices to stabilize. Housing has not found a bottom, until the free market decides prices are still way overvalued.
Let the houses go into foreclosure, there is no need to save everyone who couldn't afford it to begin with and also dumb enough to take out an adjustable rate mortgage.
ummm...doesn't a foreclosure sit on your credit for 7 years anyway? Sure, you *might* be re-eligible in 4-5 the way things are now, but still..in theory if you aren't, this is the *exact* same thing! Just big brother "scolding" you for doing it because lots of others are