How Fannie -- and You -- Bought a Hapless House
Sunday, September 28, 2008
The American taxpayers own Yellowstone, Yosemite, the Grand Canyon, dozens of parks, monuments, wildlife refuges, forests, pastureland, government complexes and historic sites. And now, for all intents and purposes, the American people are the major stakeholders in a little townhouse at 14746 Barksdale St. in Dale City.
The titular owner is Fannie Mae, which the U.S. government effectively subsumed this month, though the legal machinations are still ongoing. With the Treasury backing Fannie Mae, taxpayers have a huge interest in the fate of the mortgage giant's assets. They include the 1,296-square-foot, two-level, three-bedroom, 1 1/2 -bath house on Barksdale.
The most recent owner, Phyllis High Jones, refinanced the house through Countrywide Home Loans in 2006, taking out a $208,000 mortgage that would gradually inflate to $226,000. That same year, Fannie Mae bought the loan from Countrywide. Then the housing market collapsed in Prince William County. Jones defaulted this year. The townhouse went up for auction, but there were no takers. Fannie Mae had no choice but to become the buyer of record -- sale price $226,000.
This summer, Fannie Mae tried to sell the townhouse for $149,000. Still no reasonable offers.
The price has now been lowered to $69,900.
Although this modest townhouse is just one tiny entry on the vast balance sheet of the mortgage industry, it offers a glimpse of how a chain of bad decisions, some made by ordinary people, some by overly aggressive lenders, some by huge financial and mortgage companies, have created a historic meltdown in the housing market that imperils the U.S. economy and has led to a frantic bailout effort by the government.
The federal government does not actually own Fannie Mae and fellow mortgage titan Freddie Mac, but that is something of a legal nicety. The taxpayers are poised to become, in effect, 80 percent investors in both companies, as well as in the insurance giant American International Group.
At the base of this vast financial pyramid are actual bricks and mortar -- tangible assets in the form of houses and condominiums. The fate of these properties is now a public concern. No tenant? Roof leaking? Graffiti scrawled on the exterior? Or has someone tended to the house with love and care? Will the mortgage companies drive a good bargain, or perhaps hang onto the property and rent it until the market recovers?
These sorts of issues could ultimately increase or decrease the losses incurred by the Treasury. In some sunny scenarios, the government could turn a profit.
In the past, housing misfortunes affected individual people, individual banks, individual investors. In the new era, everyone is in this together.
"This is a crazy thing to lay on the taxpayers," says Jay Jack, a real estate agent in Dale City.
He is, in fact, the man trying to sell 14746 Barksdale. And he is the first to acknowledge that it is no dream home.