Two days ago, FNMA announced their new policy regarding strategic defaults; it’s a mortgage death penalty: seven years before the offender is eligible for another FNMA loan.\u00a0 Finally, they got one right.\u00a0 Yes, you read that correctly; if you make your profession in the business of real estate,\u00a0Wednesday’s announcement\u00a0is cause for celebration on more than one level.\u00a0 I’ll explain why\u00a0in a moment, but first let’s dispense with the two primary arguments in favor of strategic foreclosure we see over and over again from the bubble-heads on the left:<\/p>\n
Already we’ve got Shahien Nasiripour on The Huffington Post <\/a>(I know, that’s an easy target – but it’s usually\u00a0wise to start slow and thoroughly warm-up one’s disdain muscles) trotting out the tired argument about\u00a0how the average homeowner should be allowed to default because the corporations that hold mortgages do it themselves.\u00a0 Mr. Nasiripour would apparently like to see individuals and large corporations share the same default outlook.\u00a0\u00a0I wonder if he would also\u00a0prefer that homeowners negotiate their own individual, custom loan contracts; pay\u00a0much higher\u00a0commercial insurance premiums; price home loans on the specific risk of the homeowner\u00a0rather than a pooled risk; and so on.\u00a0\u00a0Either he hasn’t thought this all the way through, or he’d actually like to see the cost of home ownership much higher than it is now.<\/p>\n The other misleading argument is neatly presented by Ezra Klein at The Washington Post<\/a>.\u00a0 Actually, kudos to Mr. Klein because he not only presents the other misleading argument, but he also manages to\u00a0mislead\u00a0us\u00a0on the\u00a0very definition of a strategic default.\u00a0\u00a0\u00a0The essence of the second argument, in his own words: “…a mortgage is a specific contract. It says that if the borrower stops paying, the bank forecloses on his or her house.”\u00a0 Not quite.\u00a0 The contract specifies foreclosure as one (and there may be more) remedy available to\u00a0the bank if the borrower breaks the contract.\u00a0 The point of the contract itself is a promise by the lender to loan money at a rate and term that will not vary from what’s specified in return for a promise by the borrower to repay the loan as specified.\u00a0 That’s not such a Read more<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" Two days ago, FNMA announced their new policy regarding strategic defaults; it’s a mortgage death penalty: seven years before the offender is eligible for another FNMA loan.\u00a0 Finally, they got one right.\u00a0 Yes, you read that correctly; if you make your profession in the business of real estate,\u00a0Wednesday’s announcement\u00a0is cause for celebration on more than […]<\/p>\n","protected":false},"author":36,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_crdt_document":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[212,29,26,5],"tags":[485,413],"class_list":{"0":"post-12371","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"hentry","6":"category-flourishing","7":"category-group-therapy","8":"category-lending","9":"category-real-estate","10":"tag-fnma","11":"tag-foreclosures","13":"no-featured-image"},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":1737,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1737\/ask-the-broker-did-i-invest-in-a-sub-prime-mortgage\/","url_meta":{"origin":12371,"position":0},"title":"Ask the Broker- Did I Invest in a Sub-Prime Mortgage?","author":"Brian Brady","date":"August 3, 2007","format":false,"excerpt":"Scott asks: How can you tell if you have a sub-prime mortgage bond in a portfolio? Scott, I'm taking a stab at this. I haven't sold securities in 14 years. Mortgage-backed securities, in the early 90s, were mostly Ginnie Mae pass-through certificates or Agency-issued pass-throughs and collateralized mortgage obligations (CMOs).\u2026","rel":"","context":"In "Ask the Broker"","block_context":{"text":"Ask the Broker","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/ask-the-broker\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":1619,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1619\/hard-money-it-aint-stupid-money\/","url_meta":{"origin":12371,"position":1},"title":"HARD MONEY: It Ain’t STUPID Money","author":"Brian Brady","date":"July 2, 2007","format":false,"excerpt":"Hard money is not stupid money. Pragmatic underwriting guidelines are followed so as to insure the principle that the private mortgage really is a temporary loan, designed to solve rather than to perpetuate the underlying problem. I attempted to define this niche in one of my first posts on Bloodhound\u2026","rel":"","context":"In "Real Estate"","block_context":{"text":"Real Estate","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/real-estate\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":13664,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/13664\/i-just-feel-that-mortgage-rates-could-drop-for-a-short-period-of-time\/","url_meta":{"origin":12371,"position":2},"title":"I just “feel” that mortgage rates could drop, for a short period of time","author":"Brian Brady","date":"November 18, 2010","format":false,"excerpt":"Didn't I just tell you mortgage rates will be rising,\u00a0 ten days ago? I sure did, and I think I offered a pretty solid, fundamental explanation of how the bond bubble will pop.\u00a0 That hiss you heard, directly after my post, was the rapid escape of helium from the bond\u2026","rel":"","context":"In "Investment"","block_context":{"text":"Investment","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/investment\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":16296,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/16296\/can-bernanke-keep-mortgage-rates-this-low-into-2015\/","url_meta":{"origin":12371,"position":3},"title":"Can Bernanke Keep Mortgage Rates This Low Into 2015?","author":"Brian Brady","date":"April 1, 2013","format":false,"excerpt":"I've been a vocal critic of Ben Bernanke.\u00a0 I thought his Quantitative Easing schemes would eventually create a bubble in the Treasury and mortgage-bond markets.\u00a0 Bernanke has committed to keeping rates low for another 18-24 months. I was wrong.\u00a0 I violated the first rule of market prognostication (from the late\u2026","rel":"","context":"In "Lending"","block_context":{"text":"Lending","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/lending\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":2150,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/2150\/mortgage-grader-revolutionary-or-just-one-more-marketing-widget\/","url_meta":{"origin":12371,"position":4},"title":"Mortgage Grader: Revolutionary or Just One More Marketing Widget?","author":"Brian Brady","date":"November 1, 2007","format":false,"excerpt":"Mortgage Grader is a consumer-operated, automated underwriting system. Jeff Lazerson, its founder, has been working on this idea for 3-4 years. It was released this summer. Consumers enter information and are issued an approval. The mortgage grading engine mashes up various automated underwriting systems (FNMA Desktop Originator, proprietary sub-prime engines,\u2026","rel":"","context":"In "Disintermediation"","block_context":{"text":"Disintermediation","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/disintermediation\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":1747,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1747\/the-mortgage-tax-act-of-2007\/","url_meta":{"origin":12371,"position":5},"title":"The Mortgage Tax Act of 2007","author":"Brian Brady","date":"August 5, 2007","format":false,"excerpt":"Michael Cook did an excellent job explaining the two noteworthy debacles of last week. American Home Mortgage went belly up and Bear Stearns may be downgraded to a negative rating. Thursday afternoon, Angelo Mozilo of Countrywide Financial, did his best Nero impression by muttering two words to analysts; \"Don't Worry\".\u2026","rel":"","context":"In "Group Therapy"","block_context":{"text":"Group Therapy","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/group-therapy\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"_links":{"self":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/12371","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/users\/36"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/comments?post=12371"}],"version-history":[{"count":12,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/12371\/revisions"}],"predecessor-version":[{"id":12382,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/12371\/revisions\/12382"}],"wp:attachment":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/media?parent=12371"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/categories?post=12371"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/tags?post=12371"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}