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Fannie Mae's dirty little secret upsets low-income home owners

Dave Masko's picture

Gardiner, Ore. – Home ownership conflict has become a natural state of affairs here in this former mill town located along Oregon's central and southern Pacific coast; thus, it's no surprise that the recession has hit the housing market hard, but what’s surprising are home owners pointing to what they call Fannie Mae’s “dirty little secret” of giving better breaks and customer service to banks and investors than to those who are struggling to keep their homes after a rash of recent foreclosures.

Lower-income home owners here in Gardiner – a severely economically depressed community with a “historic district” that dates to 1870 – once worked at a thriving “International Paper Mill.” The paper mill operated from 1963 to 1999, and was considered to be one of the largest employers on the southern Oregon coast. The mill’s massive spread of buildings – that served as the only industry in the town – were all demolished in 2006. What remains is a shattered small town with one bar, one post office, one volunteer fire truck and dozens of homes with threats of foreclosure signs dotting their lawns.

Fannie Mae not catering to its mission, say low-income homeowners

Fannie Mae is a publicly traded company which operates under a congressional charter that directs it to channel efforts into “increasing the availability and affordability of homeownership for low, moderate and middle-income Americans. However, a fair and customer oriented Fannie Mae is not what Norman and Viki Burnett found when they went to Fannie Mae for assistance.

“If you look around Gardiner and up and down this coast, and inland where most home owners are lower income, you see these darn foreclosure signs on the property and that’s just not right,” says Norman Burnett, who’s lived in town since the mid-1970’s.

Walking around the Burnett’s property, it’s clear that the retired couple is proud of their home by the many do-it-yourself projects that have turned this cottage into a very nice little home. Still, home ownership and the American Dream is like gliding clouds, fading in and out of the heavens with the Burnett’s “rig” now filled up with their personal belongings as eviction time nears and the bank sits ready to claim the property.

“There’s nothing we can do at this point,” explains Viki Burnett whose husband said “she’s come unstrung, and at loose emotional ends” over the loss of their first and only home.

He then reveals a view from locals about “Fannie Mae’s dirty little secret” where they claim Fannie Mae is no longer leveling the playing field, so to speak, and “giving the banks the breaks and not the little guys.”

Fannie Mae’s practices under fire for not being fair

According to a congressional report, Fannie Mae must “level the playing field” and be “fair” when it purchases qualifying mortgages from lenders and sells securities backed by mortgage loans to investors.

Fannie Mae, the largest source of home mortgage funding in the United States, purchases mortgages and mortgage-backed securities from financial institutions and guarantees timely payment of principal and interest to buyers of Fannie Mae-issued mortgage securities.

“When a bank lender delivers a pool of mortgage loans to Fannie Mae, Fannie Mae creates a Mortgage-Backed Security in exchange for the loans. The lender can hold the mortgage security in its own portfolio or sell it to investors, stated congressional guidance,” stated a congressional report on Fannie Mae practices.

Fannie Mae responds with a foreclosure “workout programs”

While the Burnett’s and other lower income home owners along the southern Oregon coast went to Fannie Mae for help long before banks sent foreclosure notices, the help was mooted by “a lack of real customer service,” say locals who have washed their hands of asking Fannie Mae counselors for help.

In turn, one homeowner produced something called “Fannie Mae’s Foreclosure Workout Programs.” This Fannie Mae guide explains that “in order to qualify for any workout option from Fannie Mae, homeowners must have experienced a financial hardship.”

However, local Fannie Mae customers say the “real solutions” are not always offered to borrowers who have not experienced what “Fannie Mae considers as a real hardship.”

For instance, the Burnett’s said Fannie Mae gives no quarter to such things as a death in the family, or mental distress, or being laid-off, or not being able to find work in a region that’s been in the 20 percent or higher unemployment category for the past three years.

In brief, the Fannie Mae guidance states that “hardship must be involuntary in nature and involve a reduction in income or increase in expenses.”

“It says that but what this paper says and what Fannie Mae did for us is a different story,” asserts the Burnett’s who say, instead, Fannie Mae simply “set the bank on us when they learned we were in trouble.”

Moreover, a Fannie Mae representative said it divides its “work out” options into two specific categories, with the first being dubbed “Special Relief Measures” that’s more or less meant for homeowners experiencing a “temporary financial setback.”

Thus, the Burnett’s ask: “What’s temporary” in this time of recession?

Fannie Mae’s second category to avoid foreclose is called “Loss Mitigation Alternatives” that it states are “designed to assist borrowers who have had a more substantial change in their personal finances.”

“That may be all well and good, but if you depend on Fannie Mae to watch your back, than you better load your rig as we have. You have to fend for yourselves and that’s the secret Fannie Mae is not talking about,” adds the Viki Burnett.

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