In a move that local government officials throughout Michigan are describing in terms of being “disgusting…[but] not news,” Fannie Mae has released papers and internal memos indicating that the government-controlled GSE has been pushing its lenders to opt for foreclosure instead of loan modifications and threatening to “charge a penalty to lenders who allowed foreclosures to wait too long before they were executed”[1]. Ethical arguments about this policy aside, these memos are dated from the same time that Fannie Mae officials were testifying in congressional hearings that they “were doing everything in their power to prevent foreclosures.”
Curtis Hertel, county register of deeds in Ingham County Michigan, is already suing the GSE for millions of dollars in unpaid title transfer taxes. He expressed his disgust at the system that allows Fannie Mae to take losses in foreclosures with impunity because “we as taxpayers pick up…Fannie Mae’s loss in the foreclosure process.” Hertel believes this is why the GSE pushed for foreclosure over modification: “they actually get paid more for a foreclosure than for a reasonable modification.” Furthermore, says Hertel, these memos demonstrate a “direct willingness…to lie to Congress and the American people.”
While many investors have argued – or at least wondered – if modifications should be mandatory since they essentially demand that a lender take a loss on a loan, most consider Fannie Mae to be in a different category since it is in conservatorship of the federal government, meaning that it is taxpayer supported. Readers should recall that BEREL recently covered Fannie Mae’s most recent request to the U.S. Treasury for an additional $5 billion dollars, which brought its total tally of taxpayer-funded support to $104.8 billion since the federal government assumed control of the GSE[2]. Do you think that Fannie Mae and/or other lenders should be punished when they opt for foreclosures over loan modifications? Should there be a mandatory waiting period on foreclosures as some lawmakers and states suggest?
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[1] http://michiganmessenger.com/51716/officials-angered-over-fannie-mae-disclosures
[2] http://realestate.bryanellis.com/4952/fannie-mae-asks-treasury-for-5-billion/
I think this is only the beginning. What do you think is going to happen to all those people who refinanced their homes and now cannot or will not pay the loan. These were HARD MONEY LOANS, and can be foreclosed on by the mortgage instead of the Trust Deed and a deficiency judgement can be secured agains these owners on everything they own and their salaries for years to come.
Part of what helped to make this country as great an economic engine as it was was the sanctity of contracts.
The contracts that the notes and mortgages depended on were written under one set of laws (rules) and now that the politicians can see a different set of voters they are eager to change the rules (laws).
I am in no way a fan of the banks, but, if the law cannot be relied on, then little in our society remains that can be trusted.
No contract that we ever sign will stand past the next election day.
Yes, Fannie Mae should get a consequence for their actions of foreclosing instead of modifying the loans. I tried to get a loan modification for “my” condo last year for almost a year, after I had to return to NYC since I could not get a decent job in Orlando when I tried to live in the condo I purchased in 2006. Instead Chase opted to sell the major loan to some company, even thought I sent them the pertinent papers several times for the modification and I also spoke with them many times about my entire situation. I am also trying to short sale the condo; the bank does not reply to the real state agent concerning the condo. To make this story short, I am now stuck paying HOA and electricity in order not to have the condo become mildew. What are we believers of the American Dream to do?
A sharp man wrote:
I keep encountering the same myth, which is being overlooked by people on all sides; virtually none of the mortgages were ever sold to Fannie or Freddie. It doesn’t matter if they have it on their website as being owned by them. It doesn’t matter that pretenders are using false representations, fabricated documents and forged documents. The property was not sold pure and simple.
The “seller” in virtually every case was NOT the originator. And the originator never sold or transferred the obligation, note and mortgage to anyone. It doesn’t take a rocket scientist: ergo the property was not sold. Fannie and Freddie are holding zippo. Any money they paid was paid for nothing. Any property interest they are showing on their books is false.
TAXPAYERS are getting the shaft over and over again, while hidden liabilities for slander of title, trespass and a myriad of other claims pile up, for which the GSEs (Fannie and Freddie) could be liable. The money for the purchase of these loans came from taxpayers. What did taxpayers get? ZIPPO.
Because the article is focused on michigan this comment applies to michigan home owners. Announcement 09-05R,google it and read it. It is the rule book for a modification. When you read it you will be armed with the knowledge to apply for a mod…these are the rules not the garble comming out of the banks. But be prepared because once you read it you will understand just how much anti modification effort the big 3 are putting into the denial process.
2nd and if you dont do this quit crying about falling values. Send your completed file to Lansing you have representation house and senate get the numbers and fax and call, call, call.EVERY bank has a legislative liason once they understand the law makers are watching they 1st try to blow smoke( you can help combat it because you read 09-05.
then they stall just long enough to have an outdated file and cause you to resubmit which you gladly do( they will give a ridicuosly short time frame to comply)…COMPLY. Then lansing calls twice a week for updates and why do they because A) you found a helpful hand as I have on numerous occasions or B) because you call every day until they do. 45 days later you have a trial mod.
The banks dont want govt involved in the defrauding of the taxpayers so its easier to do it and move on then take the heat . stay away from the “approved HUD counselors” they dont know and dont care either
AND THEN support the law makers in lansing who support you get active in thier campaigns, work to keep the honest joe in and the Im here for the retirement package show boaters out
Loan modifications are being granted and over 125,000 of them each month are offered to homeowners. The new payments are 31% to 38% in most cases, unless its an FHA loan. If a homeowner’s payment is at 38% or higher of their gross income, then a modification is possible. Fannie Mae has been WONDDERFUL To work with at our firm since we only send them qualified candidates. The higher the mortgage payment is in comparison to the current gross income, and the higher the rate, then the more of a payment savings can be generated by the mathematics of the modification. A homeowner at 40% debt to income ratio will see minimal payment savings if they get dropped to an affordable payment of between 31% to 38% when compared with a borrower at 60%% or 90% debt to income ratio. Its all in the mathematics and most people make too much or too little to qualify for a modification or are unemployed, or don’t have a documented income decline or are already at 38% or less on their debt to income or are not delinquent or soon to be delinquent. Companies do exist to screen for modification and we are one of them and when warranted, payments are cut by as much as 66% to 75% when the current rate is above 5.5% and the current debt to income ratio is above 60% of gross income.
Well, what would happen if we criminally charged all of those scumbags that do this crap?
The problem is that they can do whatever they want with impunity because any consequences are just going to cost the taxpayer more.
How about some prison time? Bet that would get their attention.