Fannie Mae "Lockout" a Pathetic Bluff

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Mortgage and credit expert Philip Tirone said Fannie Mae's threat to prevent homeowners who "strategically default" from buying for seven years is all bark and no bite. Shortly, Fannie Mae will be knocking on renter's doors begging them to buy a home.

If we want our economy to recover, these people must have the ability to re-enter the market as soon as possible.

Intended to scare troubled homeowners, Fannie Mae's threat to "lockout" strategic defaulters is a deplorable bluff that will hurt the market instead of help it.

Philip Tirone, mortgage broker and author of 7 Steps to a 720 Credit Score, said that Fannie Mae has no intention of locking out homeowners who foreclose when they can afford to make their payments. In a plan announced Wednesday, Fannie Mae said these "strategic defaulters" would be ineligible for loans for seven years after the foreclosure.

"If we want our economy to recover, these people must have the ability to re-enter the market as soon as possible," said Tirone, adding that approximately 2.5 million homeowners are expected to go through foreclosure this year alone, not to mention the millions more who have lost their homes since the recession began.

"Like typical government policies, this one is not thought through," said Tirone. "Fannie Mae's announcement will not keep financially troubled individuals in their homes longer, but it might scare them from reentering the market and helping the economy grow."

"The government wants to see the economy recover, and with Fannie Mae in the pocket of every politician, its stringent policy will be short-lived," said Tirone. "If a person has a sizeable down payment and a reestablished credit score, and can afford a home that reduces his monthly payments, why would Fannie Mae stop this buyer from reentering the market and taking an empty home off its hands?"

Indeed, Fannie Mae has already stipulated that it would lower the lockout period for people with "extenuating circumstances." And even as it issues its threat, Fannie Mae is relaxing its existing guidelines that call for a five-year lockout.

Tirone predicts that Fannie Mae will loosen this seven-year lockout period when it sees the market stabilize.

"Mark my words," said Tirone, "Fannie Mae is just yammering on."

Even if they plan to uphold their threat, Fannie Mae's warning will not succeed in keeping homeowners from strategically defaulting, said Tirone.

"The numbers do the talking," said the credit and mortgage expert. "Many of my credit clients are underwater by as much as 75 percent. Fannie Mae is giving these people a choice: Are they going to wait for their equity to return, or are they going to face a seven-year lockout as renters? Most will choose the latter as they will be unwilling to wait for their equity to return, which could easily take seven years anyway, and only if the market recovers.

Moreover, the government-owned enterprise is failing to tell homeowners one important fact: Fannie Mae is not the only lender in town, and buyers have plenty of other avenues to homeownership. For instance, a person who went through a foreclosure yesterday can buy a home today using owner financing, said Tirone.

Tirone called Fannie Mae "a playground bully" who is simply trying to scare troubled homeowners, many of whom can barely hang on.

About Philip Tirone:

Philip Tirone is the founder of the Mortgage Equity Group (The MEG) and an expert in residential home financing. Tirone transitioned into the credit industry after watching his clients struggle to obtain loans due to hardships caused by the credit-scoring systems. Leveraging years of experience in difficult-to-obtain loans for clients with stated incomes and/or poor credit scores and studying tens of thousands of credit reports to identify patterns of change, Tirone became an expert in the world of credit-scoring. He authored the 7 Steps to a 720 Credit Score products, which he currently gives to troubled debtors through a "name your own price" offer (

Michelle Chavez
The Mortgage Equity Group
(310) 453-1901


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