Mortgage Principal Balance Reductions..Fannie and Freddie to be Abolished!

Seattle / Tacoma and the Greater Puget Sound Area get ready for possible changes mortgage changes

Mortgage write down are being discussed more seriously. This means that if you are upside down on your mortgage, as many Seattle home owners are  and have tried the modification route to no avail there might still be on last gasp effort available to you.  Reduction in mortgage principal is looming on the horizon.  (don’t miss the video below)

The real tragedy is for those of you who have actually lost their homes through bank intransigence during the mortgage modification process.  The good news is that reform of ill conceived programs may be upon us, the bad news is that the horse has been out of the barn for a three years.

A summary of these major events affecting Seattle home owners follows:

1. Fannie Mae and Freddie Mac are on a path of destruction. Many are calling for the GSE’s to be abolished!  Well, abolished is certainly a strong word.  But changes are in the offing.
2. NOW, the GSE’s are providing 75% of all new mortgages.  Which simply means that they have been the dumping ground for banks.  Somebody had to be, how about you and I!
3. There are three proposed options: Nationalization of the GSEs (that’s right you would now own them), Improved GSE structure or turn them over to the private sector (been there, done that).
4. Combined with FHA Fannie and Freddie ARE the mortgage market. Private banks are not lending…no GSE’s….no mortgages.
5. This is astounding…112 BILLION that has been spent..that will never be paid back…and they are expecting another 112 BILLION in upcoming losses! (anyone out there still think we are near bottom?)
6. Principal mortgage writedowns are gaining momentum…10% off all mortgages 25% upside down…and 25% of all mortgages 10% upside down. In the US roughly HALF of all homes are owned…no mortgage. Of the other half…35% are now upside down.
7. Let’s face it.  Something needs to be done.  Housing has been a government priority, just poorly implemented.  The end of government subsidies (with the privatization of FNMA/ Freddie) meant that homeowners would have to compete with corporate America for funds.  This meant that the game was afoot, greed could prevail and bring on the current calamity.