While defaulters living for free may be helping to stimulate the economy with money they can spend on things other than their mortgage, most of the rest of us will feel the pain as the foreclosure freeze delays the healing process for the housing market. Yet some think a delay in foreclosures might not be bad for the banks.
In fact columnist, Peter G. Miller, thinks this delay in foreclosures we've seen so far over the past year or so could have "prevented the financial system appearing significantly worse." He thinks the "national fudging process" of the banks may be able to go on a bit longer as the banks wait "until property values increase for real." Right now the banks are carrying many of these foreclosed properties at a higher value than they are worth today. Once they sell them off, they'll have to report the true value of the assets they are holding. Read More
Fannie Mae is sifting through borrower data to determine who is strategically defaulting and who is not after announcing more efforts this week to crack down on those who walk away from their homes. And if the GSE determines someone strategically defaulted, then they say they will hold the borrower accountable for all associated costs of getting the house back on the market, in areas that lawfully allow deficiency judgments.
Often when a home forecloses, Fannie Mae brokers and contractors discover vandalism and missing appliances and fixtures when they ready the home for resale, the GSE said. The cost of making those repairs and replacements will be included in the determination of the deficiency amount, the spokesperson said, in addition to the difference in the mortgage balance and the proceeds from the foreclosure sale.
Those who Fannie Mae and its servicers deem strategically defaulted will not be able to secure a Fannie Mae-backed mortgage for seven years after the foreclosure and could face legal action in order for the company to recoup mortgage debt.
Fannie will base its assessment of who is and who isn’t walking away from their home on income verification, information on the borrower’s credit report, and borrower documentation related to the disposition of prior mortgage loans, a spokesperson for Fannie said.
When a borrower applies again for a Fannie Mae-backed mortgage, he or she would have to produce evidence of hardship or extenuating circumstances to get the loan.
“Borrowers who worked with their servicers to address delinquency and/or avoid foreclosure, will be viewed more favorably than those who do not,” the spokesperson said.
According to the announcement this week, Fannie is instructing its servicers to monitor delinquent loans on the verge of foreclosure and recommend cases where the company can pursue deficiency judgments.
