Fannie Set to Punish Strategic Defaulters
Fannie and Freddie were responsible for so much of this meltdown – and now we have to listen to their ranting and thuggery. Is there a hole deep enough for these guys?
The Market Ticker
by Karl Denninger
First, Fannie Mae ran crooked books for years, got caught, ran insane risk models for years more (80:1 leverage anyone?), got caught again, the second time by the market and essentially forced the government to step in lest they default on over $3 trillion in paper sold to, in large part, the Chinese.
Now, having screwed you, the taxpayer, through outright fraud and ridiculous risk-taking and being a prime architect of the housing bubble, they now propose to bend you over again:
(Strike-outs original, italics mine.)
WASHINGTON, DC — Fannie Mae (FNM/NYSE) announced today policy changes
designed to encourage borrowers to work with their servicers and pursue alternatives to foreclosuredesigned to assrape anyone who does what banks and other commercial entities do every day – intentionally default when it suits them. Defaulting borrowers who walk-away and had the capacity to pay or did not complete a workout alternative in good faith will be ineligible for a new Fannie Mae-backed mortgage loan for a period of seven years from the date of foreclosure. Borrowers who have extenuating circumstances may be eligible for new loan in a shorter timeframemay be able to make a campaign contribution to Congress to have their penalty status lifted.
“We’re taking these steps to highlight
the importance of working with your servicerour desire to screw you twice – once via forced taxpayer support, and now directly,” said Terence Edwards, executive vice president for credit portfolio management. “ Walking away from a mortgage is bad for borrowers and bad for communitiesPumping housing prices was ruinously bad for the economy but our executives made millions doing it and now that the bubble has collapsed we have to get whatever we can from those who got scammed, and our approach is meant to deter the disturbing trend toward strategic defaultingindividuals from availing themselves of the same options that major banks undertake every single day on their commercial properties. On the flip side, borrowers facing hardship who make a good faith effort to resolve their situation with their servicer will preserve the option to be considered for a future Fannie Mae loan in a shorter period of timeto be ripped off a second time by buying another overpriced house.”
Fannie Mae will also take legal action to
recoup the outstanding mortgage debt fromfinancially rape borrowers who strategically default on their loans in jurisdictions that allow for deficiency judgments. In an announcement next month, the company will be instructing its servicers to monitor delinquent loans facing foreclosure and put forth recommendations for cases that warrant the pursuit of deficiency judgmentsfor prohibitions on the sale of KY Jelly and Vaseline in those jurisdictions.
Troubled borrowers who work with their servicers, and provide information to help the servicer assess their situation, can be considered for
foreclosure alternatives, such as a loan modification, a short sale, or a deed-in-lieu of foreclosureother ways to ruin their credit and lose their house anyway. A borrower with extenuating circumstances who works out one of these options with their servicer could be eligible for a new mortgage loanto buy another overpriced house while signing away their life in three years and in as little as two years depending on the circumstances.
As I have repeatedly said, if you are considering strategic default make damn sure to talk to both an enrolled agent and attorney first so you understand exactly what you’re getting into.