Thinking about walking away? You may want to think again. Government-sponsored mortgage purchaser Fannie Mae is trying to encourage distressed homeowners to find alternatives to foreclosure by banning those who walk away from getting new loans for seven years.
A strategic default occurs when a homeowner stops making payments on a mortgage despite being able to do so. It has become increasingly common in communities where housing values fell sharply and homeowners are "underwater," or owe more than their houses are worth.
Fannie Mae said that in locations where the law allows, it also plans to take legal action to recoup outstanding mortgage debt from borrowers who strategically default.
The wave of foreclosures affecting Fannie and Freddie has caused a major problem for the U.S. government, which effectively guarantees the loans. The government seized control of Fannie and Freddie in September 2008, a rescue that has cost taxpayers $145 billion so far. The two companies show no signs of being self-sufficient.
In announcing the new policy, Fannie Mae said homeowners who make a good faith effort to resolve their situation with their mortgage companies, and those who have extenuating circumstances, will be eligible for new loans in a shorter time period.
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