Fannie to Crack Down on Foreclosure Delays

[Joanne98]

Is a stealth shift in policy afoot, to find the bottom in the housing market by getting banks to start clearing out their foreclosed and “ought to be foreclosed” exposures?

On Tuesday, Fannie Mae announced that it was not longer giving servicers free rein, and was clamping down on multiple fronts, such as procedures and record-handling, mortgage mods. When a group of bloggers met with the Treasury in mid-August, one senior Treasury official commented on how apparent servicer intransigence (my turn of phrase, not his) with Federal programs like HAMP raised credibility issues and Treasury planned to look into it. This move suggests they knew they’d be taking a tougher stance back then.

However, one element of the supposed “get tough” program has gotten comparatively little attention. Mortgage servicers are being directed to speed up foreclosures and sales of foreclosed properties. Per Kate Berry and Jeff Horwitz at American Banker (via e-mail, no online source):

Fannie Mae wants out of its defaulted residential mortgage holdings as quickly as possible and is warning loan servicers not to stand in its way.

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The article also notes a second reason banks have reason to delay foreclosures: the biggest servicers are owned by banks that have large second lien portfolios. And quelle surprise, servicers don’t foreclose on borrowers with who has a second lien on the property at the same rate as other first mortgages. Thus, this acceleration ought to force price discovery on how worthless many second mortgages are. And demonstrating that the second mortgage holders in defaults are holding assets worth a big goose egg may break a critical logjam in mortgage mods. The second lien holders, who by virtue of being junior creditors really should have no bargaining leverage with defaults in properties that have negative equity have nevertheless been very effective in blocking mods and short sales. Are those days about to come to an end?

http://www.nakedcapitalism.com/2010/09/fannie-to-crack-down-on-foreclosure-delays.html

[HCE SuiGeneris]

1. Good.

It's time to uncloak all the damage wrought.

[OllieLotte]

4. Agreed. n/t

[Better Today]

2. Since I think a moratorium on foreclosures for a period of 12-24 months is the best

idea, I think this just sucks. How is this going to effect folks like myself that have demanded the note, but the note hasn't been found yet? Will this force the issue? I find this one aspect of this to be quite discouraging.

[Recursion]

3. Don't pull a band-aid off slowly

Either cram down or take ownership, and get it over with.

[smiley_glad_hands]

5. I can't FHA streamline refinance because Chase won't subordinate the 2nd note we have with them. n/t

[Hawkowl]

6. Catastrophic to real estate values

You think prices are down now? Wait until the available houses on the market doubles, or triples, or worse! Yes, the TBTF banks will lose all their second mortgages, but THEY can absorb the losses with all the TARP money, and the backdoor Fed T-bill exchange, not to mention rapacious fees.

No, this will absolutely destroy, DESTROY, the economy. Nevada's underwater mortgage percentage is already about 60%. Now extend that to the entire country as property values fall another 30-50% and see what happens.

Instead of FUCKING people, the government should be the lender of last resort. EVERYONE should be able to refinance for 30 or even 40 year mortgages at whatever interest rates the US government is selling bonds for. That would prevent additional inventory and stabilize prices and people might actually start spending if they don't have to worry about losing their jobs.

But this solution won't happen because this would penalize the banks! And Wall Street OWNS Obama! Yeah! Support the middle class by accelerating foreclosures and destroying EVERYONE'S equity!