If this is true, it’s deadly-serious.
I have here a record of a note that was open (and unpaid) during a bankruptcy. It was held by one of the big mortgage joints that was swallowed The debt was not reconfirmed, and it was a second.
The first is underwater. That makes the second uncollectable. Oh sure, they can sue to foreclose, but that just throws more money after what’s already been lost: Foreclosure throws the person out of the house but you not only get nothing, you have to spend the legal funds to prosecute the foreclosure!
The reasonable expectation would be that this loan is a zero – that is, it has no actual value, as the home is worth less than the first (which was reconfirmed) and thus there is no collateral behind it.
Now this note shows that it is owned by Fannie.
So when was it sold and more importantly, for how much?
This leads to the following questions:
- Are the banks knowingly dumping worthless paper on Fannie (and perhaps Freddie) – and if so are they fairly-disclosing the impairments? Gee, one has to wonder why Fannie would be interested in buying a long-delinquent second with no collateral behind it. Realistically, what’s that note worth? Are the banks being paid anywhere near face? Realistic recovery value? Is this a back-door bailout of the banks that are holding hundreds of billions of worthless second lines and HELOCs?
- If Fannie is knowingly buying these notes, is that even legal? I thought Fannie couldn’t buy impaired paper and their reps and warranties required the note be current? Has that changed? Since when has Fannie been an investor in distressed paper?
- If Fannie is knowingly buying these notes, what are their intentions? Are we about to witness the jackboot of government descend on homeowners who have underwater seconds that there is no possible way for them to pay with the full force of “collections”, including perhaps some “interesting” tie-ins with Treasury? Remember, Treasury effectively owns Fannie and Freddie now! Are we about to see tax refund seizures and similar now – for a delinquent second mortgage?
I’m sure I’ll come up with more interesting questions, but those will do for a start.