Fannie Mae Won't Lend to Deadbeat Homeowners

Fannie Mae has decided to deny homeowners who intentionally default on their mortgages any new loans for seven years, the company announced yesterday. About 12% of foreclosures are the result of people who could pay their mortgages choosing not to and walking away, generally because their home is now worth less than they owe, and that’s “bad for borrowers and bad for communities,” a Fannie vice president said yesterday.

“Our approach is meant to deter the disturbing trend toward strategic defaulting,” he continued. Fannie and its sibling Freddie Mac own or guarantee more than half of the US mortgage market, Business Week notes, and the government owns the vast majority of both companies. Strategic defaults could become a huge problem for them, because 23% of all single-family homes were underwater as of the end of March. (More Fannie Mae stories.)