What does everyone think about the latest news on the Fannie Mae's recent actions regarding strategic defaults?
I understand the desire to stabilize the housing market but when Fannie Mae (previously headed by Chief of Staff Rahm Emanuel and known only to provide loans up to $750k) buys junk mortgages from banks who are overwhelmed by foreclosures. Then starts taking legal action by leveraging new clawback laws passed on strategic defaults. All while at the same time loaning hundreds of billions of dollars to banks at 0-1% intrest then selling those same banks 4% guaranteed government bonds. I have to ask, is this social warfare or a bunch of individual government fuck ups?
Here is how I understand it so far:
1. A mortgage is a contract where a loan is provided at a lower rate due to the collateral being held. In the case of a default the holder of the loan acquires the collateral.
2. Many of the states have been passing clawback laws on strategically defaulted mortgages.
3. Fannie Mae has been buying junk mortgages from banks.
4. Fannie Mae is a government conservatorship.
5. Banks have had overwhelmingly inadequate resources to handle the amounts of loans being defaulted on.
Some disclosure: My house is not held by Fannie Mae, not underwater and the loan is in good standing.