Fannie Mae says it will crack down on homeowners who "walk away" from the mortgages on their underwater homes. Borrowers who have the means to pay on their loans but engage in "strategic defaults," won't be able to get another mortgage for seven years, according to news reports.
In states that allow deficiency judgments - California does not - Fannie Mae will sue walkaways, the mortgage guarantor said.
In Sonoma County, property values have fallen so hard in the real estate crash that one third of all homes are underwater, the Press Democrat reported this winter. That's some 34,000 borrowers looking at an average of $70,000 in "negative equity."
If Fannie Mae is going to be suing walkaways, it would seem they're just going to be driving up the number of bankruptcies. Until banks are ready to seriously modify loans to reflect market reality, people will still walk away from underwater loans. Renting for seven years is still going to look better than funding a permanently underwater home.
