Yesterday Fannie Mae sent out a press release titled “Fannie Mae Increases Penalties for Borrowers Who Walk Away, Seven-Year Lockout Policy for Strategic Default”.
Before we discuss Fannie Mae’s, lobbyist induced policy let’s make a few points about Fannie Mae a company that is 80% owned by U.S. taxpayers and part of the largest taxpayer bailout in US History.
Enough said on that. Now on to the most important parts of Fannie Mae's new policy to attempt to punish strategic defaulters. These are the key parts of the policy:
1. If a borrower walks away and a.) had the capacity to pay or b.) does not complete a work out in good faith (workouts are defined as loan mods, short sales, and deed-in-lieu), then the borrower will be ineligible for any new Fannie Mae backed mortgage loan for a period of seven years from the date of foreclosure.
2. Fannie Mae will actively take legal action to recoup outstanding mortgage debt from borrowers who strategically default in jurisdictions that allow for deficiency judgments. Fannie Mae will be instructing servicers and lenders to essentially SPY on delinquent loans facing foreclosure and ask these same servicers and lenders put forth recommendations for cases that warrant deficiency judgments.
This is Fannie Mae's rationale "We're taking these steps to highlight the importance of working with your servicer," said Terence Edwards, executive vice president for credit portfolio management. "Walking away from a mortgage is bad for borrowers and bad for communities and our approach is meant to deter the disturbing trend toward strategic defaulting.”
Well let’s see. Basically Fannie Mae intends to ban strategically defaulting taxpayers from obtaining a mortgage loan from a company that is owned and financed by taxpayers because taxpayers have decided to stop paying their mortgage. On top of that Fannie Mae will get servicers and lenders to SPY on taxpayers to determine if they are strategically defaulting.
The primary ways in which to determine if a taxpayer strategically defaults are the review of tax returns, bank statements, income, savings, and investments. Then balance that against their expenses and liabilities. HMMMM…how can a servicer or bank get that information? The servicer or bank will request the borrowers financial information in order to process a loan modification, short sale, or deed-in-lieu. It get’s the info by PRETENDING to offer a loan modification by taking monthly TRIAL PAYMENTS and then denying the modification anyway…AKA Making Home Affordable Program (HAMP). It get's the info by PRETENDING to offer a deed-in-lieu and then denying it. It get's that info by PRETENDING to allow for a short sale and then denying it.
Can Fannie Mae, a servicer, or lender use financial information collected from a borrower against them in a proceeding for a deficiency judgment?
Of course the missing piece to the puzzle is: Underwater Properties.
What happens if a taxpayer homeowner can establish that their property is underwater thereby establishing it makes economic sense not to pay the mortgage? Which is what Fannie Mae basically did when it was bailed out on its poor investment choice of purchasing and holding worthless mortgage backed securities. It looks like lenders are hoping that the government will shift more of the loss of valueless homes on to taxpayers.
This comes on the heels of the United States House of Representatives introducing a potential law that has a provision barring "government-backed loans for borrowers who had strategically defaulted–walked away from their homes when they could still afford the mortgage payments."
What about basic contract principles? A mortgage loan is a contract between a borrower and the lender. If the borrower stops paying then the lender has specific rights and remedies contained in the contract. Why is Fannie Mae interfering with a borrowers contractual rights?
Can you say "Easily Influenced By Banking Lobbyist?
Can this be legal?
Is this even CONSTITUTIONAL?
Most importantly, WHY DOESN’T THE GOVERNMENT PUNISH LARGE BAILED OUT BANKS AND BUSINESSES THAT HAVE STRATEGICALLY DEFAULTED?
Why is the GOVERNMENT enforcing ECONOMIC Slavery? Why should any taxpayer waste their money on an asset that has no value. Businesses, investors, governments, and countries strategically default all the time.
Oh I see...our government believes banks and business are too big to fail while taxpayers, ordinary citizens are too small to succeed or protest.
Can you tell I am mad. You should be too.