Fannie Mae Says Strategic Defaults a No-No

By
Real Estate Agent with RE/MAX Andrew Realty Serfvices

There’s been a lot of talk about strategic mortgage defaults. Here’s the scenario: Bob Buyer purchases a home. After a few years the real estate market has a “correction” and the house is no longer worth what Bob paid for it. Even though he can still afford the payments, Bob decides it makes better economic sense to walk away from the house and let the bank foreclose.

Here’s a 60 Minutes segment on Strategic Defaults:

Fannie Mae has decided to take a strong position with borrowers who can pay their mortgage but choose not to. It will now take 7 years before Fannie Mae will guarantee a mortgage for a borrower who did a strategic default. Not only that, they will try to get deficiency judgments against these borrowers to attempt to recoup the money that was not paid back. Some states are non-recourse states which means that the bank can’t go after the borrower for the unpaid money, but Massachusetts isn’t on the list.

People who have fallen on rough times won’t face these same issues. Borrowers who lose a house due to a financial hardship will find a much friendlier Fannie Mae willing to back a loan for them in only 2-3 years.

So if you can afford to continue paying your mortgage but have been considering just walking away, think carefully. You still might end up owing the money but you’ll no longer have the house.

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Topic:
Real Estate Market Trends
Groups:
MA REALTORS
Tags:
fannie mae
mortgage default
strategic default

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Rainer
77,547
Jason M. Keith
Caliber Home Loans - Parker, CO
Equal Housing Lender

Good Post!  I read other Blogs on this and there are a lot of opinions.  I think it's very important that regardless of the opinion we need to warn folks before they walk away that they still may face serious consequences!!!

Jun 24, 2010 10:12 AM #1
Rainmaker
3,062,488
Tony and Suzanne Marriott, Associate Brokers
Serving the Greater Phoenix and Scottsdale Metropolitan Area - Scottsdale, AZ
Haven Express @ Keller Williams Arizona Realty

Strategic Default is an acronym for cowardice.  If one is an ostrich - then stick your head in the sand.  If you are a responsible individual - do a Short Sale - unless your legal and tax advisors tell you to do otherwise.

Jul 09, 2010 06:57 AM #2
Rainmaker
165,790
Jill McTague
RE/MAX Andrew Realty Serfvices - Medford, MA
DebOnTheWeb & Associates - Medford, MA Real Estate

Thanks for making a very good point Jason

I agree with your position Tony.  Buying a home and taking out a mortgage is a responsibility.

Jul 09, 2010 07:54 AM #3
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Rainmaker
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Jill McTague

DebOnTheWeb & Associates - Medford, MA Real Estate
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