Fannie Mae Wants Consequences for Strategic Default
A few weeks ago, Fannie Mae issued an outright threat to homeowners in this country, creating a new rule that would punish anyone who stops paying their mortgage and walks away from their home, referred to as a “strategic default,” by not allowing those who choose that path to get a Fannie Mae loan for seven years.
They call it their “Seven-Year Lockout Policy for Strategic Defaulters,” and if you haven’t realized it already… look what’s been accomplished here: Homeowners have scared the heck out of industry giant, Fannie Mae. I mean… these guys are shaking like leaves, absolutely running scared. I know homeowners have been feeling like they have no power against the bankers, but this should prove otherwise. It’s like we pushed the bully, and the bully ran home and got his Mom to come lay down a new rule in response.
On Fannie’s Website, Terence Edwards, Executive Vice President for Credit Portfolio Management has the following to say about the new rule:
“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.”
Bad for borrowers, Terrence? Really, how so? Are you trying to say that people who walk away from their underwater mortgages are doing it because it’s bad for them? Because I don’t think they think that, Terence. I’m pretty sure that those that choose to walk away from their mortgages do so because they’ve figured out that it’s better for them… in their own best interests, as they say.
Hey Terrence, you disingenuous prick, I understand that my walking away from my mortgage is bad for you, but that’s only because my house is now worth half of what I owe. You wouldn’t mind if I walked away from my mortgage if I had equity, right? So, in other words, you want me to lose the couple hundred grand instead of you, does that about sum up your position here? Yeah, well… I’m sure you do. But I, on the other hand, would prefer that you lose the money instead of me. Sorry about that.
Terrence, last I checked you’re just a giant failed mortgage lender who is as much a part of why we’re in this mess as any, and you’re going to need $1.5 trillion in taxpayer dollars to bail you out.
I’m a taxpayer, Terrence… isn’t that enough of a loss for me to take on your behalf? You want me to contribute my tax dollars and probably my child’s future tax dollars to your $1.5 trillion bailout. And on top of that, you also want me to eat the loss of a couple hundred grand on my house?
Geeze… when are you guys planning to kick in on this? Your CEO gets a $6 million a year salary, I looked it up, and best I can tell he gets paid to say “yes” to just about everything. I don’t know, Terrence, but I’m pretty sure that I could have bankrupted Fannie Mae for a lot less than $1.5 trillion.
Walking away from a $500,000 mortgage on a house that’s now worth $250,000 isn’t bad for the borrower, it’s good for the borrower… it makes all the financial sense in the world, for the borrower. I mean, would you recommend that someone hold onto a stock that’s lost half its value.
Then you say it’s bad for communities, Terrence, why do you think that’s the case? I mean… bad is a relative term, wouldn’t you agree. And, in terms of doing bad things to communities, aren’t you guys at Fannie Mae pretty much the poster children? Like if the Olympic Games had a “Damaging Communities” event, wouldn’t you guys at Fannie be like the Michael Phelps of gold medalists, at the very least?
Yes, I’m afraid you would at that, Terry my boy. You guys are responsible for wiping out more communities than say… I don’t know… Joseph Stalin comes to mind. So does the bubonic plague. So, now you’re all of a sudden so concerned about my community, are you?
Terry, my home appraised at the peak of the insanity at $925,000. Last week, we heard there was a short sale about eight homes down from us. Any guesses, Terry? Well, I doubt you’d come close to $360,000 Mr. Fannie Mae spokesperson and executive VP. I bought this house in 1990 for $340,000 you insensitive jackass. Your incompetence has cost me a fortune.
You and your peers owe me money… or at the very least an apology… or something else, but how dare you attempt to “punish me” should I decide to become a productive member of society sooner by choosing not to take $300,000 and set it on fire. And what would you like me to do, Terrance, if I spend the next twenty or thirty years paying for this house only to find out that I’m still under water by some amount at that time? Any thoughts on that, you housing genius? Maybe, try to do better in my next lifetime, Terrence?
How exactly will my strategic default harm my community? How exactly, Mr. Edwards? Because I’m thinking two things here:
One… If I let the home go into foreclosure, it’ll be an REO and the bank will resell it at the market price, or maybe a little below. But, no one is going to give it away for free, right Terry? The market price is the market price, right you mumbling mathlete?
If I’m allowed to short sale it, maybe it will sell for a little bit more, but then again, it might not sell at all, in which case I’ll still end up in foreclosure, but I won’t be able to stay in the house, saving money as a result of not making payments, while I pay a lawyer to prolong my free stay for as long as possible. By the time I walk away, I’ll have maybe $100,000 saved up, which will make moving and renting an absolute breeze… to say nothing of my mental state, much improved as a result of controlling my destiny and screwing you.
Two… a strategic default only creates a foreclosure, and if you were so concerned about the impact of foreclosures on communities, we wouldn’t be in the situation we’re in today. I hope you’ll forgive me if I laugh at you feigning concern about how foreclosures affect our communities. I’ve been watching quite a few loan modifications up close and personal, and I haven’t seen Fannie Mae lift a finger to help a single homeowner. Banks are abusing homeowners left and right, every single day of the year, with the exception of a few who take Christmas off, and where has Fannie Mae been?
Now that I finally decide to take matters into my own hands, in the best interests of me and my family, now you’re going to try to punish me, you worthless piece of trash, how dare you? Go to hell, Terrence Edwards. You’re an insolent punk for saying what you said, for trying to scare homeowners who are trying to survive this inconceivable catastrophe that you and yours created. You’re an empty suit hiding behind some overpaid government job, nothing more.
You, of all people, claiming that strategic defaults are harming communities is absolutely hysterical. Like cautioning people to take an umbrella when going for a walk into the eye of Hurricane Katrina. Don’t forget your umbrella… you wouldn’t want to get wet. Yeah, thanks for that advice.
Your approach is to “deter the disturbing trend” towards strategic defaulting? Is that what you said? Well, that’s the best damn news I’ve had in at least three years. You and the rest of the self-important louts at Fannie Mae are actually disturbed by something. Well, thank the good Lord, I am glad to know that. Because you certainly haven’t seemed very disturbed at the carnage that’s been destroying the housing markets to-date, Mr. Terrence Edwards.
If strategic defaulting is disturbing you and Fannie Mae in general, well then that’s just about the best reason I could possibly think of for doing it. You talked me into it, Terrence, and God willing quite a few others in this country whose lives have been ruined because of Fannie’s ruinous policies and incompetent management.
And then, as if Mr. Terrence Edwards hadn’t said more than enough, he went on to say:
“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 time.”
On the flip side? The flip side? I swear, someone needs to give you such a slap. On the flip side, you actually have no idea what you’re talking about, do you? You think people are walking away because they didn’t talk to their servicers? You think, in that distorted little brain of yours, that it’s homeowners who need to act in “good faith” more often?
Well, that’s it for me. I don’t know what to say in response to that, except to say that I can’t believe Terrence Edwards has a management job anywhere, let alone at the world’s largest source of lending. After a statement like that, this guy should be asking women if they’d like to see something in a pump or a loafer.
Homeowners aren’t the ones failing to act in good faith, Mr. Ed. Homeowners would all try to work with their servicers to resolve something in good faith. Homeowners, and I’ve personally talked at length with thousands of them, have “good faith” written all over them. They exude it from their pores. That’s why they didn’t storm the castle when you and the other banksters needed to be bailed out after you guys decimated the global financial system. But… on the flip side… their servicers consistently, and by that I do mean all the damn time and every damn day… continually lie, intimidate, bully, flagrantly break promises, and exhibit a lack of caring that would make Mary Poppins look like Dr. Mengele.
Are you unaware of this, Mr. Ed, you horse’s ass? Has this somehow escaped your attention? Missed it? Busy watching the World Cup or something? Come on, no way… you know exactly what’s going on between servicers and homeowners out there, and if you really don’t, well then you most certainly should.
In the spirit of leaving nothing to chance, allow me to explain how this whole mess happened. We, the taxpayers, sat by and watched our elected representatives bail out Fannie Mae, and every other bankster in the country, we sucked it up and then watched Goldman et al, pay out $120 billion in bonuses last December.
Our President said he had a plan, and that banks would modify loans… there was hope. But there wasn’t, was there, because the banks and servicers proceeded to treat homeowners like something stuck to the bottom of their custom made shoes. They lied all the time, like constantly. They bullied and made people feel badly, and in general they proved beyond any doubt that they could not be trusted.
No one is walking away from their home because they weren’t willing to make a good faith effort to find an alternative resolution by working with their servicer. Never happens, or happened. And if it has started to happen, which I still don’t believe, it’s only in response to the treatment of homeowners by their servicers. And true to form, the Wall Street Journal writes a story about homeowners happy about their decision to strategically default, some other news program interviews someone going to Hawaii as a result of not having to pay a mortgage payment, and you… you don’t bother to find out what’s really going on… you start with the threats.
Here’s what you said on Fannie’s Website:
Fannie Mae will also take legal action to recoup the outstanding mortgage debt from 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 judgments.
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 foreclosure. A borrower with extenuating circumstances who works out one of these options with their servicer could be eligible for a new mortgage loan in three years and in as little as two years depending on the circumstances.
Oh, so let me get this straight… a Deed in Lieu, a short sale… those are just fine in your mind, but a strategic default is bad for borrowers and bad for communities. Do you hear yourself? How would a Deed in Lieu be better for the community, Mr. Edwards? Never mind… you don’t know.
However, in your top paragraph above, you are saying that you’re going to go after deficiency judgments in states that allow deficiency judgments? Well, goodie for you. But, does that mean that you won’t go after deficiency judgments in states that allow them if the borrower simply attempts, in good faith, to work it out with his or her servicer, but fails? I doubt it, don’t you Terrence?
And you’re going to ask the servicers to “put forth recommendations” as to who should be pursued for a deficiency judgment? The servicers? The group of companies and individuals that have, perhaps more than any group in history, proven that they cannot be trusted to follow rules, keep promises, or tell the truth. I suppose they will also be the final arbiters of whether the homeowners attempted to work it out in “good faith,” as well. Yeah, that’s about right actually. Par for the friggin’ course.
Well, I’ll tell you what, Mr. Terrence Edwards. You think you can threaten millions of American homeowners? Why you would presume to have such authority is beyond me, but I’ll promise you this… you’ve certainly motivated me in a big way. How many homeowners do you suppose I can reach through my 300,000 readers if I try really hard? Because that’s precisely what I now am more committed than ever to doing. Just because of you and your threats.
What was the threat anyway? Oh yeah, those that you or the servicers deem strategic defaulters won’t be allowed to get a Fannie loan for 7 years, but the “good faith” people… which I would guess are those who agree to whatever their servicer demands, might get one in two or three years.
First of all, who cares about getting another loan in 2-3 years? No one I know. But even more to the point, what in the world makes you guys at Fannie Mae think you’ll be around in seven?