Troubled borrowers who do not try in good faith to work out a deal, but have the capacity to pay, are targeted by the policy.

"Walking away from a mortgage is bad for borrowers and bad for communities and our approach is meant to deter the disturbing trend toward strategic defaulting," said Terence Edwards, an executive vice president.

A strategic default is 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 company plans to instruct its servicers to monitor loans facing foreclosure and recommend cases to pursue for such judgments.

A spokesman for fellow government-backed mortgage buyer Freddie Mac said its current policy requires at least a five-year wait. Freddie Mac will "take a close look" at the new Fannie policy, said spokesman Brad German.

Fannie and Freddie were created by Congress to buy mortgages from lenders and package them into bonds that are resold to investors. Together, they own or guarantee almost 31 million home loans worth about $5.5 trillion. That's about half of all mortgages.

The wave of foreclosures affecting Fannie and Freddie loans has caused a major problem for the U.S. government, which effectively guarantees the loans.

The government seized control of Freddie and Fannie in September 2008, a rescue that has cost taxpayers $145 billion so far.

The two companies show no signs so far of becoming self-sufficient.

true/slant.com
author Megan Cottrell

As the $8,000 home buyer tax credit dried up, so did housing sales. The number of people buying a new house dipped to the lowest levels in recorded history after tax credit ended in May, causing many people to worry that the recession will be shaped like a W – a perilous double dip.

What’s the cure for the ailing housing market? One real estate analyst says the answer is counter-intuitive: more foreclosures.

Why? Well, analyst Mark Hanson says foreclosures are what people want to buy. The new home buyers out there want (and perhaps can only afford) a good deal. But lately, pressures on banks to halt foreclosures have curbed the supply of cheap houses. Because we’re in a market where people are iffy about taking a big risk, unless the carrot is big and juicy enough, people aren’t going to bite.

Plus, Hanson says, there’s still a huge shadow market out there – homes where the mortgage isn’t in good standing, but they’re not in foreclosure yet. Hanson says we’ve got to clear through all this bad inventory – both the homes in foreclosure now and the ones yet to be – if we want the market to turn around.

The way he explains it sounds sort of like an old rusty faucet – you’ve got to let the water run orange for awhile before it starts to come out clear.

At our current pace of foreclosure, he says, it will take 101 months to clear through the system – 8 years. But if we doubled our rate of foreclosure to 180,000 a month, he says it till take 42 months, or about 3 and a half years.

Housing activists all over the nation are putting pressure on banks to slow the rate of foreclosure. It’s hard to argue with. Who wants to put more people out of their homes?

But then again, Hanson could be right. If the entire economy is spooked by low housing sales, it means less jobs being created, fewer people spending money. Many of those who are dreading a foreclosure can’t pay their mortgage because they can’t find a job or find one that will pay a decent wage.

Is it better to be without a house in the short term paired with a quicker recovery? Or if Hanson’s right, are we just dragging out the inevitable?