Fannie Mae's decision 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 per housing and lending experts.
The big mortgage financing company, which owns or guarantees millions of mortgages, announced recently that it would sue homeowners who have the capacity to pay but default anyway. It also said it would prevent these strategic defaulters from getting a new Fannie Mae-backed loan for seven years, which could potentially shut millions of buyers out of the market. But it was unclear, the experts said, why Fannie Mae was threatening delinquent owners and what it hoped to achieve. The new direction seems to run counter to the Obama administration's efforts to reinvigorate the housing market. And there were basic questions about how Fannie would be able to distinguish between those homeowners who defaulted intentionally and the unfortunate ones who had no choice. How are they going to do this, and for what result? To find the people who have a little money left after their house crashed and take it away from them?
A Fannie Mae spokeswoman said that the goal of the new punitive policies was 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. "We really want to encourage borrowers to pursue alternatives to foreclosure," said the spokeswoman, Janis Smith.
