According to some estimates, 1 in 4 homeowners have under-water mortgages and 12 percent of home foreclosures are “strategic” or purposely induced because a house is worth less than the mortgage owed on it. Fearing that “strategic” foreclosures will continue to rise, Fannie Mae has announced that they will lock out borrowers from receiving a new mortgage for seven years if they default on a mortgage that they could have repaid.
“Walking away from a mortgage is bad for borrowers and bad for communities, and our approach is meant to deter the disturbing trend toward strategic defaulting,” said Terence Edwards, Fannie’s executive vice president for credit portfolio management.
Fannie Mae has also said that they plan to take aggressive legal actions against any homeowner they determine has used a strategic foreclosure and will seek deficiency judgments so that they can go after the borrower’s assets. How will they determine if a borrower in foreclosure could afford their home? Fannie Mae has said they will instruct its lender partners to monitor foreclosures and delinquent accounts and recommend cases that may warrant action on the mortgage lender’s part.
Are these the same lender partners that sold toxic mortgages to borrowers who could not pay in the first place? Aren’t these the same lender partners who are at least partially or even mostly responsible for the foreclosure crisis we’re in right now? Why would we trust them to have the competency to determine who could pay and who could not pay their mortgage? This is just another reason for homeowners to consider bankruptcy if they are facing foreclosure. Homeowners who file bankruptcy may have more protections from the “strategic” foreclosure witch hunt that Fannie Mae seems to be intent on launching.