New legislation coming from Capitol Hill will allow Fannie Mae to take legal action against mortgage owners who did not make their house payments although they were fully capable of making them.
The situation has imploded to the point that there may be more than 2.4 million foreclosures that will occur. And this doesn’t include the millions of homeowners who are upside down on their homes.
These strategic defaulters who could obviously pay their mortgage but decided it was not worth their time or money and who did not complete a workout alternative in good faith will have to face Fannie Mae who plans to limit their access to government-sponsored home loans for seven years.
But that’s not all. Mortgage lenders who feel they have been defrauded by these consumers will seek deficiency judgments in court. This will legally bind the borrower who has quit paying on their home loan to pay any balance that is still owed after their house is sold off.
In the state of California, a bank or mortgage lender can only obtain a court ordered deficiency judgment if the home loan was used to refinance a home but not if it was used to fund a purchase.
And as regards the ability for future borrowers who have purposely defaulted on their current mortgage to attain another government-sponsored home loan?
Think about it for a moment: What if Fannie Mae took the stance that any government sponsored loans such as a FHA loan would not be available for ones who simply walked away from their home loan?
Especially if it can be proved that they engaged in a “strategic default” or the abandonment of their home to foreclosure not because the payments were unaffordable but because the home buyer became upside down on their St Louis loan. In other words, the mortgage loan is larger than the value of the residence.
How long will this borrower be in financial limbo? Well, according to Fannie, they would not buy or guarantee another home loan for these fraudsters for seven years.
The research firm CoreLogic interestingly points out based upon their recent data that homeowners will more often than not continue to pay on their mortgage even if their house value drops if they have the money and income to do so.
But borrowers on both a local and national level are more likely to walk away from their St Louis home mortgage loan when the home’s value is at least 25 percent less than the original home loan amount.
March 2010 saw about 31 percent of foreclosures as strategic walkaways by the consumers themselves which was compared to only 22 percent in March 2009.
However, many are now questioning why it took so long for Fannie Mae to make these debtors finally owe up to their financial responsibilities?
And then there are the hardliners who feel the punishment as it were should last longer than seven years. Why? Because they feel the mortgage collapse was a direct result of these irresponsible home buyers.
The real problem started when homeowners began treating their house as an investment or A.T.M. instead of their family’s home.
As a struggling nation trying to get back its financial strength, many experts are calling for the use of common sense and thus get back to the traditional viewpoint that a house is a home to live in and not our own personal A.T.M.
Fannie Mae is apparently not letting bygones be bygones. Not only will they refuse loans to these home buyers for seven years, they are getting court orders seeking deficiency judgments making them pay any balances owed after the home is sold.
Many are now considering why the current Administration seems to be sweeping this issue under the political carpet as if this is not a serious problem when in reality it is of huge importance especially since Fannie Mae has taken such a strong stand against these homeowners.
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