The Effect of Foreclosure

June saw an increase in foreclosures in San Mateo.   Foreclosures are tough on a neighborhood and ultimately a community.

When there’s no one occupying a house it starts to deteriorate.  The lawn doesn’t get mowed as often.  Weeds pop up in the yard.  Newspapers and mail pile up.  Any problems on the inside go unnoticed.  Sometimes a homeless person will make it their resting place for a while or vandals will make their mark.

That one house is now diminishing the value of the homes around it.   Then another foreclosure; now the whole neighborhood is impacted.   Whenever the number of foreclosures increase the value of all the houses in the neighborhood decrease.

Frequently foreclosure can’t be helped.  But what about when it can?  Home owners can afford the house but are deciding they just don’t want it anymore because it’s worth less than they paid.  They’re walking away in such large numbers that Fannie Mae is taking a stand:

DN News reports:  To sway homeowners from the growing trend of strategic default, Fannie Mae has announced several policy changes designed to encourage borrowers to work with their servicers and pursue alternatives to foreclosure. Under these changes, borrowers who strategically default will be ineligible for a new Fannie Mae-backed mortgage loan for a period of seven years from the day of foreclosure. In addition, Fannie Mae said it will take legal action to recoup the outstanding mortgage debt from strategic defaulters in jurisdictions that allow for deficiency judgments.

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  1. [...] Fannie Mae discovers that you’ve walked away from a house that you could afford not only will they decline giving you a loan for the next seven years, they’ll come after you for the money you defaulted [...]

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