Courtesy of Tyler Durden
It is now time to short Apple: Fannie Mae has just announced that it will no longer condone the same kind of irresponsible behavior that the Obama administration will soon be trying hard to codify into law, namely strategic defaulting. According to Dow Jones, bankrupt GSE Fannie Mae, announced "it won’t back new mortgage loans for seven years for homeowners who walk away from their mortgages although they were able to pay or did not seek a workout in good faith with their lender." Terence Edwards, an EVP for Fannie, after having been a recipient of trillions in moral hazard (and having a job as a result), finds out that being on the receiving end of a total lack of integrity is not quite as pleasant: ""We’re taking these steps to highlight the importance of working with your servicer. Walking away from a mortgage is bad for borrowers and bad for communities." Oh, now they tell us.
More humor from Dow Jones, as the GSEs finally realize just how screwed they are:
Fannie Mae said it also will sue borrowers who strategically default on their loans to recoup the outstanding mortgage debt in jurisdictions that allow for deficiency judgments.
Strategic defaults are becoming more common, various studies show — a Morgan Stanley report pegged them at 12% of all home-mortgage defaults in February, up from "insignificant levels" three years ago. Lenders fear borrowers who "walk away" will greatly increase the industry’s foreclosure-related losses, which already total in the hundreds of billions of dollars.
In addition, growing social acceptance of this behavior could have ramifications not only for personal credit histories and the health of neighborhoods, but also for the future of mortgage lending, according to those studying the issue.
One possible reason the numbers are rising is some homeowners’ belief that lenders aren’t aggressively pursuing those who default, according to a report by the Chicago Booth/Kellogg School Financial Trust Index.
Our advice: short AAPL now. The Generation 293,394,459 iPhone (to be released by December 2010 at the latest) may not be the marginal boost to EPS that all analysts who think Apple at a $1 qunitillion market cap is a screaming buy, as US consumers soon realize that the choice between a gizmo and a roof to sleep under is really not all that tough. Alas, Obama’s plan to force Americans to not pay any mortgage bills ever again, is about to be massively derailed.
h/t London Dude Trader
