Turns out that policy of surprise eviction may or may not have been slightly unethical, dumb, and possibly illegal.  Remember when Fannie Mae took that gigantic $700 billion government bailout check?  Turns out there were strings attached, and one of those strings was that “tenants in good standing” of properties they foreclosed on were to be allowed to remain in the property.

Did you miss that provision in the 451 page bailout bill?  Don’t worry, so did Fannie Mae, but now that a couple of lawyers from Connecticut have pointed it out, Fannie has decided to comply rather than face a lawsuit.  I think it’s great that SOMEONE is actually looking out for tenants rights, but the decision leaves me with two questions:

• Who is going to manage the tenants and rental properties?  Is this an internal management structure  being planned (bad idea!), are they going to contract it out to local third party management firms (good idea!), or do they even have a plan for this in place yet? (SUPER bad idea!)
• What sort of plans are in place to prevent fraud?  When some people get evicted, they damage the house on the way out.  The financial equivalent would be to rent the house to someone on a multi-year lease for $1/month.  Even more fraudulent would be to rent the house to an acquaintance(accomplice?) for $1/month and then sublet it back from him.  Now you’ve managed to not pay the rent in the 6-12 months, and you’ve got a fixed rent of $1/month, without even having to move after the foreclosure!  What is Fannie Mae doing to protect itself from that?

Unfortunately, I haven’t found any good answers, yet.  The policy itself is excellent, it’s all those pesky associated details that get in the way.  Bear in mind that while keeping these properties occupied will help protect the condition of the home AND neighborhood, it’s also going to force the lenders to bleed even more red ink since the rental income is considerably lower than the sales value, which would skew their earnings statements further.
~Jonathan Benya- Realtor
Century 21 New Millennium
9405-A Chesapeake St
La Plata, MD 20646
301-609-9000
301-653-8116
Charles County Real Estate Blog

“The two companies say they will halt foreclosure sales between Nov.
26 and Jan. 9, while they evaluate whether borrowers qualify for a new
loan modification program.

Fannie and Freddie’s loan modification
plan aims to help abate the foreclosure crisis by aiding homeowners who have fallen at least three months behind on their payments, but only if
their loans are held by the two companies.”

This qualifies as a brilliant PR move, but in reality actions like this are just as liable to do more harm than good. Ask yourself two questions:

1. Is this going to stop people from getting foreclosed on, and allow them to renegotiate their mortgage? and…
2. Is this a benefit to the economy and the housing market?

Aside from the sentimental goodwill of it all, we’ve got some serious problems with this decision. This is not a decision to stop the foreclosure, but rather a decision to delay it. Delays which *should* help people renegotiate their note.

Anybody know the percentage of people who successfully renegotiate their note after 3+ months of delinquency? Or the percentage of re-negotiated notes that fail anyways? (here’s a hint, 50% of owners who get “modifications” end up getting foreclosed on anyways!)

If you’re delinquent on your note by that much, there’s a good chance you simply won’t be able to afford getting current again….

Don’t think this buys you more time to get your short-sale ratified, either. If you’ve got something on the table with fannie/freddie, they’ve been known to delay foreclosure in order to let a deal settle, so that may be extra time you could have asked for anyways. BIG WHOOP.

So odds are that this won’t really HELP many people save their home (and it won’t help anyone who’s working with a lender other than fannie/freddie), so will it stop them from being thrown out into the snow on Christmas Eve? They didn’t say they would halt eviction filings (Which typically take about a month) on homes they had foreclosed on, so it’s still possible to get thrown out the week before Santa comes if you were foreclosed on at the beginning on November. As Ebenezer Scrooge said: Bah, Humbug!

It’s obvious they’ve given the newsies a nice little holiday PR piece, but this is going to create trouble in the next few months. This little stunt will make market inventory volume fall artificially, and make the market look like it’s getting better. Once they start foreclosing again, they’ll be 2 months behind, which means a flood of properties on the market simultaneously, NATIONWIDE, and foreclosure rates and stats will spike again. When foreclosures jump up, people panic, assume the worst, run around like headless chickens; you name it, they do it.

When the market is seen as more unstable (and prices fall harder than anticipated in Q1 ’09) due to this freeze, you know who to thank. While I understand the need for trying to modify so many of these loans, why are we risking the already weak housing market with another potential blow? It’s like a boiler building steam. If you don’t open the release valve, pretty soon it’s gonna blow.

~Jonathan Benya- Realtor
Century 21 New Millennium
9405-A Chesapeake St
La Plata, MD 20646
301-609-9000
301-653-8116
Charles County Real Estate Blog

There’s been quite a few stories this evening about the Fannie Mae/Freddie Mac Takeover(Socialization) this evening.  The first question on many people’s minds is: What Does This Mean To Me?

I’m not going to muse on the repercussions of holding their stock (ask the wall street analysts, but it doesn’t look good), but I do want to look at what this means for ordinary folk like you and I that may have a mortgage backed by the lending giants.

You see, the purpose here is to PREVENT Fannie and Freddie from going under.  They’ve lost over 3 billion dollars in the last 3 months,  and the Government has stated they would step in to financially back them in order to prevent failure.

If the Government steps in as expected, first and foremost, the government will be financially insuring the losses here (This may add a billion or 3 to the national debt, but hey, who’s counting?).

If you’ve got a note with them now, this is designed to protect you.  It will ensure that they remain solvent enough to operate.  But what about people looking to possibly get a note through Fannie or Freddie?  Well, this might be the biggest (perhaps only) winner out of the whole deal, and here’s why:

Government control over these entities is going to ensure, without a doubt, their financial solvency.  Government regulation will likely allow mortgage rates to remain lower than they would be if the groups financial stability remained threatened.

This could become a great step in helping the housing market recover, but it’s going to come at the expense of ALL taxpayers, and the bill is certain to be in the Billions.  If you’re getting ready to purchase a home, keep your eye on what happens to the mortgage rates next week, and be ready to lock in if the rate takes a dip!

~Jonathan Benya- Realtor
Century 21 New Millennium
9405-A Chesapeake St
La Plata, MD 20646
301-609-9000
301-653-8116
Southern Maryland Real Estate Blog