Austin REAL ESTATE

Diana Olick - Fannie Mae: Walk Away and You Will Pay

“Dare I say it? "What took you so long??" An announcement from government-owned
mortgage giant Fannie Mae warns: "Defaulting borrowers who walk-away and had the
capacity to pay or did not complete a workout alternative in good faith will be
ineligible for a new Fannie Mae-backed mortgage loan for a period of seven years
from the date of foreclosure." I have to ask: Why only seven years? Up the ante!
Look, I understand that a lot of folks are sitting on overwhelming bundles of
negative equity in the form of four walls. A very credible argument can be made
that a bad investment should not be a jail term. However, a lot of the housing
crash was based on a fundamental change in attitudes toward home ownership, i.e.
that a home is an investment before a dwelling.

The pendulum needs to shift back, not all the way, but more toward the
traditional use of home: A place to live, not an A.T.M. "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," notes the press release. I'm wondering why they haven't been doing
that all along? My guess is they simply don't have the legal resources available
to handle such a huge job...which brings me to my final thought: If the mortgage
walk-away issue is big enough for Fannie Mae to get this tough, then why have
Administration officials been telling me over and over that "it's just not that
big an issue." Seriously, I've done several interviews over the past year,
bringing it up over and over, and they just seem to want to sweep it under the
rug. I guess the rug is getting a bit too bumpy.”