Fannie Mae: Pursuing you for your money With YOUR money!
Shahien Nasiripour of The Huffington Post reported on a story that has flown somewhat
under the radar, regarding Fannie Mae's announcement of their intent to pursue for the deficiencies (in states that allow it) of those who strategically default on their mortgages.
I've written about Strategic Defaults in the past when someone who could otherwise afford their mortgage payment decides they're tired of paying on an underwater, depreciating asset (i.e. throwing good money at bad) and simply walks away without attempting a loan modification, short sale or other loss mitigation action.
While the mortgage industry obviously frowns on this act, more and more people are finding it's often the best way out of a situation they really had almost no hand in creating.
Sure, there are people who borrowed irresponsibly but in general, far more people are casualties of the current real estate crisis, than they are the causes of it.
Let me digress for a moment and use myself as an example, to help better understand the rationale behind choosing to strategically default. I purchased a condo almost 10 years ago. I've made my payments on time every month and, while I only put 5% down, I've done everything I've been contractually expected to do. However, if I wanted to sell today, I would have to bring $100k to the table to cover the amount my property has dropped in value. Pass.
To take it a step further, the bank has made tens of thousand off of me in interest payments, whereas my down payment and all my money sunk into remodeling, etc., is gone. By my choosing to discontinue making payments and walk away, the bank is more or less losing future money I'm obligated to pay, but not a ton as far as money already loaned out. I'm losing out on real actual money that was invested and will see no return.
Keep in mind this is my primary residence. To take a hit on an investment property is unfortunate, but it's a gamble and most people going in know this. To buy a home in which you plan to reside, it's not unreasonable to think the value will go up lenders and mortgage companies have been selling us on that for years. It wasn't unreasonable for me to think that I would be able to sell my place 5, 10 years later and make a profit, let alone cover the mortgage amount.
For the first time since the great depression, that is no longer a reasonable expectation.
So, people like myself find themselves in a curious position. I could try a modification, but then I would have to go delinquent on my payments, thus ruining my credit AND taking a chance that a loan mod wouldn't be approved or even offered. With few people actually getting temporary modifications, let alone permanent ones, it's a risky bet. I could do a short sale, but with a second mortgage, it's highly likely I'll still get stuck paying back a portion or all of the deficiency especially since I live in Michigan.
So while a strategic default might sound like an irresponsible action, the very concept was born out of the banks underwhelming desire to work with people.
Back to Fannie Mae.
Fannie Mae bears just as much responsibility for the mess we're in as any other lending institution. Maybe more, between their sub-prime lending practices/nonsensical lending formulas and their inability to accurately predict the potential outcome of those practices.
Consider the following it's been written that Fannie Mae (and other lending intuitions) generally believed that property values would continue to appreciate at 6%-8% annually forever. Essentially, they took peak bubble appreciation and concluded it would stay that way indefinitely, never dropping. As Kyle Bass of Hayman Advisors put it, simply hiring an actuary to look just three years into the future could have probably avoided much of what we're stuck dealing with today.
Fast forward to the present.
As cited in the article, almost 80% of Fannie Mae and Freddie Mac are owned by taxpayers, thanks to a bailout that not only kept the two mortgage entities from failing, but ensuring that they had unlimited financial assistance.
And the thanks they offer to the very people who provided them with that money? You will play by their rules and go along with what they decide is right for you. If you choose to decide your own fate without working with them, they will use your tax dollars to pursue you.
Obviously, a short sale is the easier way to work around this, however that still might not release you from liability for the deficiency it may just reduce the amount you're liable for. For that reason, your best bet is to work on change from the top your elected officials. Write to your member of congress, senators or anyone in your municipality, city or state who might have influence and let them know that in order receive the massive amount of tax payer cash being funneled to Fannie & Freddie, they need to do a better job of working with the people keeping them solvent
Fannie Mae: Pursuing you for your money With YOUR money!
By: Jeff
Paper Overload? Steps to Transition to a Paperless Office for your Financial Records Cabinet Refacing Saves Money Updated - Acai Pure Ultra Review - Is It Safe? Arlington, TX 76017 More Vandergriff Toyota Reviews Ratings Answers Juki HZL 35Z Sewing Machine Review Singer 7468 Sewing Machine Review Brother CE4000 Sewing Machine Review Brother CE 5500PRW Sewing Machine Review Asthma Free Forever Review- Cure Asthma Permanently Mending Your Financial Problems Top 3 budget Nazca Hotels Chuck Hutton Chevrolet Company Reviews - Finding A Review Of The Nutrisystem Flex Program