FANNIE MAE SET TO COLLECT ON DEFICIENCY JUDGMENTS CAUSED BY STRATEGIC DEFAULTS.

Lynn

This is a great post that raises a lot of concern.  I agree with Debe Maxwell and Karen Stone.  I don't believe people who are able to pay should walk away from their responsibility. On the other hand, people who are suffering legitimately because of economic or unforeseen family situations should not continue to be penalized.

If you hear me bleating, its cause I've been fleeced....

Great post! What a way to put it out there so that everyone can really understand it.

If a corporation can walk away from its obligation to pay and write it off, why shouldn't the home owner be? They just got us for 800 billion, and now they want to collect deficiencies from the public? Get real people. In this economy?

RE Tax Deduction on Losses:

I realize that trying times seem like they call for knee jerk reactions, but they really don't.  That's just the emotions talking.  Don't listen.

What you are outlining would be the single-largest tax on the middle class and you just killed 80% of the Realtors.

About the only really good tax credit that Main St. really gets is the primary residence exemption.  This is one tax credit that is for people above the poverty line and below the mega-wealthy line.  If you create a write-off on losses, you will then get taxes on gains during the every normal market.   90% of the time, the middle class loses on this idea and the big loser is the senior whose retirement plan you just trashed.

As for the death of the salesman, how many buyers would upgrade to Property #2 if they were paying 20-30% tax on the gains from selling Property #1.   If they outgrew the house and Uncle Sam is getting paid, full-service brokerage as you know it is dead.  Discounts and FSBO's would pressure commissions to the floor. 

Strategic Defaults...

On one hand..the homeowner signed a promissary note saying that they are financially responsible to repay the mortgage and that they will do so..these people also can afford the payment

On the other hand..they lost money...we all did. The difference is that they can afford to stay in the house they promised to pay for where others couldnt afford to do so. When you buy stock and the price drops before you settle up your account you have to pay the difference on the acocunt at market close that day. When the price of your home drops, you still owe what you borrowed. Letting people walk away from houses that they can afford to pay for and promised to do so will just put us further into debt as a nation.

If fannie wants to do something about this they should make it impossible for someone who defaults strategically to buy another property for 7-10 years or something to that effect as they are going back on their word even though they can afford to pay.

Lenn, did some beltway incumbent steal your keyboard ???  That was beautiful.

How did you weave a non-answer regarding a predatory tax hike that hurts the middle class and seniors into trying to help "American home owners?" 

Your idea just sounds inherently more patriotic than mine--I didn't even think to explicitly reference that I was talking about America.  I'm not believing that you're not running :)

Lenn once again a great post & a good discussion. The powers in DC will always gravitate toward the money. Heard this AM that several Wall Street firms have pulled back their campaign donations from those politicians who appear to be for a strong Financial Reform Bill under the justification that they are anti-business. My response is that in the small business world when your P&L shows more loss than profit you cut back until you either stay afloat or you sink & go out of business. How many of the banks that took TARP or other Federal assistance (extremely low interest rates) cut back on expenses or close up shop? None. The top 5 banks now makeup approx. 35% of the GDP.

As for the strategic walk away, I think if they can afford the loan you should stay put but if your family finances are borderline where you are taking from Peter to pay Paul then something should be done to help them more than a loan mod. Fannie Mae's decision is wrong and will do more harm to our already fragile economy.

Wow! Very Powerful Stuff!  I certainly agrre with everything you said. Unfortunately, I think our economy is way our of wack- Much to slanted to big business. The little guy, whether homeowner or small business owner, doesn't have a chance. I don't think that people should be allowed to walk away from their responsibility, but many rich and powerful people have done just that, so why can't a struggling homeowner?  And how do we separate the legitimate hardship cases from the people who just want to take advantage of the system?  Not an easy task.

I am sure that they will..but something has to be done as I have many "rich" investors that are walking away from 2nd and 3rd homes that they can afford just because it lost value..I think the guidelines should be on homesteaded properties only...those that own 2 or more homes should get penalized for walking away.

Lenn, I agree that by the time our congress & banks wakeup to realize what they have done to the homeowners & consumers; no amount of money that the Fed throws at the problem will be able to solve the situation and we will have a 1930s recession again. My HS World History teacher had a favorite saying that has stuck with me for years: "History is cyclical and repeats itself because people & governments fail to learn from the past."

Lenn,  Don't know how I possibly missed this post.....and, after reading many of the comments, all I can say is "Amen" to yours.  Every time I see another "solution" presented by Congress I want to pull my hair out...they have put more time and money into creating the paperwork than they have in helping the American homeowner.  Makes me crazy.

I agree 100%.  I've been hearing they were going to do this, but it's now months later and I haven't heard of a single person that's been pursued for the deficiency.