More fallout from the burst housing bubble comes in news that ward of the state Fannie Mae is telling potential “strategic defaulters” that, if they choose that option, they won’t be able to get another Fannie Mae mortgage for seven years. As detailed in this report at Fortune, since the U.S. government now is the U.S. mortgage market (and that’s not likely to change anytime soon), that means they won’t be able to get another home loan.
Fannie cracks down on walkaways
The government-backed mortgage company said Wednesday that borrowers who default while they are able to pay won’t be able to get another Fannie Mae (FNM) mortgage for seven years. The company said the stiffer terms would “encourage borrowers to work with their servicers and pursue alternatives to foreclosure.”
Fannie also threatened to sue homeowners who walk away from their mortgages in states where such deficiency judgments are permitted.
The moves come as falling house prices leave more homeowners under water on their loans, and weak employment and income trends are putting pressure on debt-soaked households. Officials fear a spate of walkaways could send house prices tumbling again, renewing pressure on the banking industry.
Meanwhile, those who do walk may have few alternatives, given the near total government control of the mortgage market now.
It’s probably safe to say that this is the final “nail in the coffin” for the whole idea of a U.S. “ownership society”, a notion that was once endorsed by the U.S. government. Now it seems they’re much more interested in the citizens continuing to own the debt than the house.
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Just some more scare tactics by banks and now the gubment as perpetrated by the media. Just like the last story you posted in this vein there are no examples of this actually happening.
Good luck proving a default was “strategic”. They would not only need to pursue and WIN a judgment in court but then actually collect. Bankruptcy protection would slow that baby on down just about every time.
With these tactics there won’t be any buyers left for 7 years. F and F won’t have any choice in a few years but to keep on writing loans to less the stellar borrowers. Comedy.
Perfect. What an opportunity for Private Mortgage Companies on a local scale! Co-Ops and credit Unions. Who wants to deal with Uncle Barry on a mortgage anyway?
It’s time for the GSEs to go away… they have terrible names anyway.
That’s perfect for walk awayers, the housing market might have bottomed in 7 years!
So true. You are the boss.
haha, yea, it is probably in their financial interest not to buy a house for another 7 years anyway.
What comes next is killing non-recourse mortgages altogether. Default on your house and they’ll come after all your other assets.
I think that’s the way it works i most other countries – you can’t just walk away and mail your keys back to the bank.
I find it unbelievable that Fannie May will EVER lend to people who have defaulted. Those people should have to save up 20% down.
Banks have no profit (i.e. loot) without lending. In the case of all the big state-backed institutions, it isn’t even their money that is being put at risk but they collect the fees and interest. Of course they’ll lend again to the high risk groups, unless enough people figure out whats going on and shut down state-sponsored credit facilities.