Adjust their interest rate. They're already doing that, in fact.We've already covered this above. But imagine if you will one mortgage at $950/month. Multiply that by 1 million. Now add in an average of 8% interest. Doesn't take a mathmatician to figure out that's ALOT of money Fannie and Freddie potentially are losing each time a homeowner mails in their keys and allows their home to be foreclosed on or files for bankruptcy.
They've lost money because there aren't enough viable buyers. No longer can entry-level buyers buy with no money down, negative amortization loans, poor credit, stated income loans, 3% down loans, and all of the creative baloney that allowed people to live beyond their means. And most of them unintentionally, I might add. I'm all FOR assisting these people. But simply forgiving amounts owed over the WORTH of their homes isn't the answer, as far as I'm concerned. It sends a message to everybody else -- why pay your bills? The government will bail you out.You stated that your home has lost 25% of its value. Why is that? I assume your neighborhood still has a sound economic infrastructure, i.e., stores, shops, manufacturing, banks, technology centers, etc. With that assumption, the only conclusion one can make for the decline in your home's value is that your neighbor's homes have been appraised downward. As such, I assume many of the homes in your neighborhood have been left vacant since the housing bubble burst. Here where I live, the housing bubble hasn't affected my city that much. In fact, we're experiencing the exact opposite! I have five subdivisions going up around my neighborhood as I type this. And last year, my home was appraised at ... well, let's just say I'd make money if I sold my house today. So, if your home has lost value since the housing bubble, I can only assume it's because you have alot of vacate homes around you that have been appraised downward. Get people back into those homes who will pay their mortgages even at a reduced modified rate and I guarantee your home's value will increase over time. And where you have vibrant home ownership, you have property taxes. And when you have property taxes being paid you also have consumers buying goods and services. Therefore, your local economy feels the positive impact homeowership brings...just as it feels the negative impact of not having homeowners stay in their homes.
Yeah, I don't sense you're taking sides. I think we just have a disagreement on the value of this kind of program. The one thing I will say is that banks have been just absolutely snails when it comes to modifying mortgages. And even in selling foreclosed properties. There are buyers who are willing to buy these properties -- and banks unwilling to move fast enough to capture them.Taking the above into account, it stands to reason that as long as Fannie and Freddie modify many of the mortgages they own even if they are "made" to do so, the taxpayers won't have to bail them out because in time they'd still make money as opposed to continuing to have homeowners mail in their keys and let foreclosure overtake them or file for bankruptcy.
Think about it...
For the record, I'm not on Fannie or Freddie's side here. I'm just giving what I view as a practical solution to a very ugly situation.
I'll go back to my original post on this thread -- that if the government were to enact this kind of program, the backlash from those who PAY their mortgages, who DON'T get forgiven part of their debt will be, I think, overwhelmingly negative. At the polls.