Fannie Mae New Purchase Bar: Bark not Bite

Financial Justice Foreclosure

041007_fanniemaePhoenix OK, let me try and get this straight.  Fannie Mae (with its housing finance partner Freddie Mac) is already bailed out to the level of about 200+ billion with some estimates that the final federal bailout bill will hit almost $400 billion, right?  Most of that is a transfer of their bailout money over to the banks and financiers on government secured mortgages that go belly up, which accounts for about half of the total level of foreclosures now according to the government.  So taxpayers are actually propping up a good deal of the market because we are allowing Fannie, Freddie, and their banking buddies to NOT right size the values of the mortgages to market, which would both keep many families in their homes and reduce this two-step transfer of taxpayer money over to the banks and their inflated portfolios and investment arms.  If I’m missing something I’m not sure what it might be?

And, now in an announcement covered in the Wall Street Journal, Fannie Mae has the gall to climb on the high horse of what the bankers all like to call “moral hazard,” and claim that they are going to “lock out” any borrowers from their guarantees who they determine walked away from a mortgage that was underwater despite having the ability to pay.  Sitting on top of bailout city, there needs to be an irony alert!

But, there’s an important huge, gaping loophole.  The delay is not 7, but 3 if the borrower can prove that there were “extenuating circumstances,” which I’m sure would include reduction of income, loss of overtime, etc, regardless of other assets, and if there was a documented effort to work out a resolution with the lender, which means  there was an attempt to get a modification.

Fannie Mae can threaten all of the lawsuits and seizures it wants, but given the disaster of the loan modification programs and the indifference with which lenders are foreclosing on houses even when borrowers qualify for modifications, there is no court in America, and certainly not in Arizona, Nevada, California, and Florida, where Fannie is indicating it has concerns about the numbers of houses that are underwater and the level of “strategic defaults,” as the industry is calling the walkaways, that would ever find for the bankers and their federal handlers against the harried and unassisted borrowing.

Who is kidding whom?  This is a bully boy move in a bad playground, and the only way to deal with it is to spit in their eyes.

They need to issue fewer press releases and instead create real programs that provide real values and real relief.