Federal Housing Finance Agency (FHFA), which gets to make such ruling, has now officially told Fannie Mae and Freddie Mac it will not permit them to use principal reduction (forgiveness) as a tool to tunnel their way out of a ton of mortgages gone bad.

There will be a political hue and cry about this..it’s already happening. But think about it:

80 percent of all Fannie and Freddie “backed” mortgage payers are current with their payments. They’re surviving the burst bubble. The ones I’ve talked with who ARE paying are NOT in love with the idea of forgiving those who ARE NOT paying.

Understandable, especially with the proliferation of people who are NOT paying because…well they just decided they’re paying into “a lousy investment”–their devalued (by the market) home. And, the backlog of default processing is giving the “I just won’t pay” people 1-3 years to save their money for something else, before they have to leave the house.

This “home as investment” mentality was born of massive appreciation This sudden large gains in equity produced the “home as ATM” for many of the same people who are now frustrated because their pot of gold has now been vaporized.

All they’re left with is–a place to live!

Imagine that. Many people still remember a time when that was exactly why you made the biggest purchase of your life. Appreciation was expected to be modestly positive over years. The reward was “it’s all mine; and I’m being conservative with my money too.”

Well, today’s FHFA story about “no forgiveness” reminds me that those days of buying a home as a “place to live” are coming back, and quickly too.

It’s a good thing.

By the way, yes, I’m very sympathetic toward people who have lost jobs and can’t find new ones. If only we could find a way to help them, and not help those whose ATM froze.

No forgiveness–a sign of real positive change?

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