2010-06-29 CNN
This seems pretty big. What is this all about?
Yes. It's huge when you really think about it. You know, really, homeowners or potential home buyers have about three options when you're looking at financing a home. It's Fannie Mae, it's Freddie Mac or the Federal Home Loan Administration, which is FHA. They do about 95 percent of the houses that were financed last year.
So, I mean that, so, clearly it has to be big. And it has to be impacting millions of people. Why is Fannie Mae doing this?
Well, the main thing is because of strategic defaulters. They really want to get the people that are walking away from their homes. And the strategic defaulters are someone that abandons their property. They say that not because they can't make the payment, but because the house is underwater, because they owe more in the house than the house is actually worth. And they make a decision to walk away.
And so, they really want these people to hold up to their responsibility and really settle it, you know, in good faith.
So, they can technically pay but they're opting to kind of get the easy out, is the problem, and that's what they want them to stop.
Yeah, and they got different situations. About 10 million people or more are actually underwater right now in the U.S. in their homes. So, it's a hard situation. It's hard to tell exactly whose situation is what and why they're actually walking away.
And I want to get into that in a second. But what is the potential fallout here of this one decision by Fannie Mae?
I mean, it's going to hurt millions of people that potentially could qualify for a house three or four years down the road but they can't because of this action. So, it's going to hurt a lot of people.
Also, I mean, you're thinking about, really, we need a boost in the housing market right now. This just seems a little bit counterproductive to what the president has been trying to do for the last three years in stabilizing the housing market. And so, you've got that issue.
So, there are several things that you really have to look at as far as the impact. You know, they really want people to, instead, you know, do a short sale, talk to them, do a deed and lose. So, they want to look at other options instead of just walking away.
They're trying to incentivize you to look for a different avenue ...
Exactly.
... including means that saving them money.
Exactly. Exactly.
So -- but some experts -- they announced this just this week -- but experts are already saying it's going to be near impossible for them to kind of implement this. I mean, how do you distinguish as giant Fannie Mae between someone who's really in trouble against someone who can pay but just isn't paying? There must be some real questions about this.
Yes. And that's one of the big questions that I have. I mean, how do you really do that? How do you determine that someone actually tried to modify their home or if they're in a situation where, you know, they just couldn't afford it anymore or the house is so much underwater the neighborhood has changed so much that sometime they don't feel safe in those neighborhoods.
And so, you've really got to look at each case individually and see exactly how each person is being affected by it.
It seems like there are a lot of details that still need to be worked out.
A lot of details that need to be worked out and, you know, you're getting a lot of mixed results. Some people feel that this is good. Some people feel that it's bad. But you really got to look at overall what it's doing to the economy and what's it doing to the housing market.
I'm going to need your help with this one. We're going to come back to you when we have more details to figure out what is going on.
Our financial analyst Clyde Anderson -- thank you, man. You're the best.
Thank you. Thank you, Kate.