Sunday, September 28, 2008
How we all lose in the mortgage market
Fannie Mae & Freddie Mac were set up to re-liquify the mortgage lenders and support home ownership. Because of this they, we, are the owners of record of a lot of mortgages gone bad. Rising values, go-go salesmen and foolish mistakes by people who should know better has given us this example of how we lose.
The titular owner is Fannie Mae, which the U.S. government effectively subsumed this month, though the legal machinations are still ongoing. With the Treasury backing Fannie Mae, taxpayers have a huge interest in the fate of the mortgage giant's assets. They include the 1,296-square-foot, two-level, three-bedroom, 1 1/2 -bath house on Barksdale.That's $157,000 up in smoke, if they can sell it for that price. And this is just one home that was not securitized and covered by a default swap. Hang on to your hats, $700 Billion may not be enough.
The most recent owner, Phyllis High Jones, refinanced the house through Countrywide Home Loans in 2006, taking out a $208,000 mortgage that would gradually inflate to $226,000. That same year, Fannie Mae bought the loan from Countrywide. Then the housing market collapsed in Prince William County. Jones defaulted this year. The townhouse went up for auction, but there were no takers. Fannie Mae had no choice but to become the buyer of record -- sale price $226,000.
This summer, Fannie Mae tried to sell the townhouse for $149,000. Still no reasonable offers.
The price has now been lowered to $69,900.
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