Here is another one from the Virginia Association of Realtors Newsletter. It seems that Fannie Mae is looking at sueing specifically, but not limited to, "Strategic mortgage defaulters." I have preached about this before, those who strategically default think that they will not pay any price for walking away. One way or another you will pay (and we all will pay for them not paying). I have mentioned in blogs before that the money one might save by a mortgage default could cause your credit card rates to skyrocket among other things. Good luck getting a good rate on that next car loan. I had said before that before anyone considers a strategic default, they should look at the long term consequences. Well, here is another one, a potential lawsuit from Fannie Mae. I can only imagine (I am not a lawyer) that any judgement would include garnishment of one's wages and harassment from the IRS. The message here is: If you are thinking to default because you just don't feel like paying, perhaps you should step back and think about the results of your actions for awhile. Then decide if it really is the best course of action to take.
Thanks for posting this. While I am against strategic defaults and think those that go down that road should be held accountable in some way, I hate to think that the IRS is going to be involved in another enforcement action. That scares me more than the strategic defaulters getting away with something. Hope all is well in Virginia.
Tom, all of this is making strategic defaults look like, well, a bad strategy!
Gary, considering that IRS employees were caught fraudulently filing home buyer tax credits its like the fox in the proverbial hen house.
Patricia, it is a bad strategy and very short sighted.
The potential for default is implicit in the note and its companion contract the mortgage or deed of trust. If the note has a non recourse clause, the question of strategic default is moot. By the absence of a recourse clause and/or the presence of a clause that specifies that there will be no deficiency claim, the lender has granted a put option to the borrower. In that instance the borrower has an implicit right to default, move out and mail the keys. In that right the borrower has an implicit moral obligation to always act in his own self interest. Fanie and Freddie are chasing moon beams and this is a form of propaganda that will not sell.
What one ought to be wary of is that little 1099 document that says that in canceling your note you received income in the form of the loss the lender incurred in foreclosing and selling your former residence. That, and only that, is the impediment to the so called strategic default. You can take that to the court house and aseert that the lender was negligent in seeking fair market value.
It's lawyers heaven. And Fannie and Freddie are going to be blown up in the near future so what's to worry. As to MER they never did bother to record the conveyance of the note, again it's lawyer heaven.
This is, after all, the American Way.
Law partners Robert R. Hager and Treva J. Hearne, with Reno attorney Mark Mausert, have filed a case in Nevada and one in California against Mortgage Electronic Registration Systems, which operates an electronic registry of mortgage loans in the United States. MERS serves as the mortgagee of record for lenders, investors and loan servicers in county land records, but doesn't own any mortgages.
By using the firm's names on deeds and other paperwork, the lenders are able to avoid county recording fees, according to the firm. MERS has no financial interest in the loans, but is listed as actual owner or surrogate for the owner on millions of deeds of trust, even as individual mortgages are repeatedly traded and packaged inside of mortgage pools.
The lawsuits argue that listing the firm as the owner of mortgages in which it has no interest in order to avoid filing fees and taxes constitutes fraud
How soon do you think cash strapped states will go looking for those filling fees
It will be interesting to see how all this will play out in the future. Thanks for your educational input.
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