Associated Press

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.

 

 

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.

The total value of Florida foreclosures repossessed by banks in the state increased by nearly 8 percent in the first quarter to $1.77 billion, based on figures from the Federal Deposit Insurance Corporation.

These properties in bank owned listings also contributed to the downfall of a lot of banks in Florida. On May 7, the FDIC closed the tenth Florida bank to tumble this year and as of March 31, a total of 24 Florida banks were struggling from under-capitalization.

The FDIC has already lost almost $1.3 billion to pay claims arising from Florida bank failures this year, in addition to its $7.3-billion loss in 2008 and in 2009 involving 16 failed Florida banks.

This year, 17 more Florida banks are expected to collapse this year if there is no significant intervention to rescue these distressed banks. Their substantial exposure to Florida foreclosures are tying their hands up, leaving them with no funds to finance their operations.

Based on interviews with Florida bankers, the cost they have to bear to put properties into listings of foreclosure homes so they can resell them has shot up to around $100,000 per one foreclosure case, up from only $40,000 in 2007. The time spent to complete foreclosures has also lengthened from only 6 months in the first months of the crisis to around 18 months this year.

What worsens the situation after all the costs and hassles banks undergo is to be forced to list their repossessed properties as cheap houses for sale, as higher-priced foreclosures languish on the market.

Despite the decline in foreclosure activity in the state in April, Florida moved up from fourth-place to third-place on charts of foreclosure listings by state during the month. It was California which improved by two places from second in March to fourth in April.

To help banks survive the effects of Florida foreclosures, the Florida Bankers Association has proposed in the last state legislature session to speed up the foreclosure process.

Authored by William Henderson 786-346-5611

The Miami foreclosure market is offering some interesting deals for the home buyers interested in buying and investing in properties in Miami and South Florida during the onslaught of foreclosures that keep coming. In fact, in lucrative locations like Miami and South Florida, investment in the residential real estate market is bound to be a very profitable deal. Even if you are one of the ones that is apprehensive, regarding investing your income in the Miami Foreclosure Market this is the safest deal for you.

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However, if you are looking out for a nice remodeled home / condo that includes being profitable deal then Miami / South Florida is the right place for you to buy. This being the best time for you to invest in the Miami / South Florida Real Estate market as the prices of properties are still falling at a record pace. You will have the ability to sell your properties when the prices are at a high in the real estate cycle, as it is a continuous ongoing process. Now the prices are ripe for purchasing homes / condos, this will be followed by an uptick in market conditions where the prices in the property market will increase.

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Happy House Hunting!!