Somebody Everybody want to educate this “fool” on how the Homeowners took down the Entire Global Economy???
For years, defaulting homeowners who couldn’t repay their mortgages have been portrayed as victims. That mentality is so pervasive, in fact, that when one of the two mortgage lenders of last resort had the audacity to show the smallest bit of backbone last week, it caused a huge controversy. For everyone who’s worked hard to repay their debts and grown tired of propping up their less responsible neighbors, the news couldn’t have been more welcome.
Fool me twice, shame on me
Last week, Fannie Mae (NYSE: FNM) decided that it had had enough of the “strategic default” phenomenon. In an attempt to dissuade homeowners from walking away from their delinquent mortgages…
In addition, Fannie Mae said that it would seek deficiency judgments where permitted against homeowners who strategically defaulted on their mortgages.
One Reuters columnist argued that Fannie Mae “demonizes the victims of the housing bust” by “putting out press releases which talk airily and moralistically about people who walk away from their mortgages.”
If homeowners decide to give up and walk away, Fannie and Freddie Mac (NYSE: FRE) shouldn’t hesitate to enable Wells Fargo (NYSE: WFC), Bank of America (NYSE: BAC), and other former beneficiaries of the government’s TARP largesse the same ability to give away more money to these homeowners when they try to buy another home — leaving you with the bill, again.
The real moral hazard
The idea that delinquent borrowers should benefit from their bad judgment runs against good sense. Already, laws in many states protect homeowners from bearing the full consequences of their bad decisions, leaving taxpayers like you and me on the hook. Fannie’s proposal doesn’t hurt anyone who is truly a victim, but rather focuses directly on those who sought to profit unfairly from the housing bust and are unwilling even to try to act in good faith with lenders.
As I see it, it’s about time. Without some sort of consequences for their actions, there’s nothing to stop these borrowers from doing exactly the same thing again. And having gotten away with it once, they’re not likely to feel any qualms about it the second time around.
With the housing system already in shambles and causing economic chaos across the nation, the last thing it needs is a group of opportunistic borrowers taking advantage of attempts to help those who truly need it. Fannie’s move is a small step, but at least it’s a step in the right direction.
Think this guy is way out of line? Let him have it in the comments below on this site and on his original post here…
Source: Motley Fool Defaulting Homeowners Finally Pay the Price