Even as the housing market gets weaker, Fannie Mae has decided to get incredibly tough on homeowners who walk away from their mortgages even if they can't afford to pay. The mortgage giant plans to sue those homeowners and would also prevent them from getting new home loans for seven years.
Critics are calling that plan unduly harsh and don't think it would be easy to tell the strategic defaulters from those who couldn't really afford to pay. We seem to want to place a moral obligation on individuals who default on their loans because it makes financial sense, while we wouldn't do the same for companies that make a similar business decision. But it's also true that about a quarter of homeowners are underwater on their mortgages, and it's hard to imagine strategic defaults from all of them not causing a disaster.
Add to that an affordable rental market that's been neglected for years during the buying boom, and landlords who are struggling in the downturn as well, and those who need housing help the most right now still seem unlikely to get it. There's a tendency to concede that part of the problem with the housing market is that individuals made poor choices to get into homes they really couldn't afford. But it's important to remember they didn't make those decisions in a vacuum. There was a huge system built to encourage people into homes, almost no matter what. They're not making decisions to default in a vacuum, either. There's a huge system that's trying to prop up the housing market, but in reality the best choice is still to walk away.
-- Monica Potts
