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Fannie Mae Makes Homeowners Think Twice About Walking Away

June 26, 2010

The housing collapse left 10.7 million families owing more than their homes are worth. So some of them are making a calculated decision to hang onto their money and let their homes go.

Recently Fannie Mae  decided to begin punishing people who walk away from their unpaid mortgages could prove difficult to sell to the public and might be impossible to execute, housing and lending experts said Thursday.  The big mortgage financing company, which owns or guarantees millions of mortgages, announced on Wednesday that it would sue homeowners who have the capacity to pay but default anyway.

Outfits like have sprung up all over offering desperate homeowners a way out

Many have resulted to what’s refereed to as “Jingle Mail”, which is situation where a homeowner mails his or her house keys to a mortgage lender due to an inability to meet mortgage payment obligations and a lack of equity in the property. If a homeowner is upside-down in a mortgage and feels the entire loan is a lost cause, he or she may choose to walk away from the property altogether and relinquish it to the original lender instead of going though the foreclosure process.


  • Prevent these strategic defaulters from getting a new Fannie Mae-backed loan for seven years.  Created
  • Created to force defaulting homeowners to work with their servicers to surrender their houses through either a lender-approved short sale or by formally giving up the deed


  • Could potentially shut millions of buyers out of the market.
  • find the people who have a little money left after their house crashed and take it away from them

Potential Problem

  • The new direction seems to run counter to the Obama administration’s efforts to reinvigorate the housing market.
  • How will Fannie would be able to distinguish between those homeowners who defaulted intentionally and the unfortunate ones who had no choice.
  • One is that foreclosures depress the neighborhood and drive down prices.

I recently poised this question to my facebook friends.  Do you think people that throw their hands up and walk away from their homes before they foreclose should be penalized by not being able to purchase another home for 7 years??

and here were some responses:

(Djuan Coleon)  No sir, you never know what frame of mind people are in when they are on the brink of being evicted or foreclosed on. They may be looking at a lifetime of memories that they are about to lose. It may not be the most prudent thing to do but losing a house is a serious psychological ordeal , I know I been there before.

(Yolanda Walker)  No, because a lot of people were faced with having to choose between what they thought was a great investment and the quality of life for their family. I think a lot of people worked hard to keep their homes and were just mislead. Not to mention banks aren’t exactly jumping at the opportunity to help. I think 7 years is a little harsh. I agree with 3 years though, there has to be some consequences.

(Jeffrey Sachs) The fannie mae proposal states that they must wait 7 years if they did not have financial hardship or did not try to work out there current loan with the servicer. If people who just walked away because they were not going to make money on it are not penalized than our whole system will go down the tubes. Accountability needs to return and quickly.

(Roz Barnes) No! The banks didn’t! Companies file for bankruptcy all the time and open back up with no problems at all.

Republicans recently added a measure to a Federal Housing Administration financing bill in the House of Representatives that would forbid strategic defaulters from getting an F.H.A.-insured loan.  FHA currently controls 30 million mortgages, providing liquidity to the housing market.

Stay tuned….

One Comment leave one →
  1. Power Edge MG permalink
    June 26, 2010 7:22 pm

    Damn if you do! Damn if you don’t!

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