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Financial Pundits Decry Fannie Mae's Threats

Last week's announcement that mortgage lender Fannie Mae would toughen the penalties it applies to homeowners who strategically default on their mortgages has provoked widespread debate among personal finance experts.

Fannie Mae has said that it will bar mortgage holders who default without making a sufficient attempt to settle their debts from being eligible for any further Fannie Mae-backed loans for a period of seven years. According to Terence Edwards, executive vice president of Fannie Mae's credit portfolio management unit, the lender is "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 and our approach is meant to deter the disturbing trend toward strategic defaulting."

Outside experts, however, say that the government-backed mortgage lender has no intention of piling on the misery for strategic defaulters, who will already have to contend with damaged credit scores and numerous other financial consequences. Mortgage Equity Group founder Philip Tirone said Friday that "Fannie Mae's announcement will not keep financially troubled individuals in their homes longer, but it might scare them from reentering the market and helping the economy grow." Tirone also cast doubt on the length of time the lender's policy would remain in effect, hypothesizing that it would quickly disappear once the housing market stabilized.

That stabilization, as well as the more general recovery of the economy, is increasingly reliant on the credit scores of American consumers. While the measurement has long been used as a yardstick of an individual's credit-worthiness, it has recently become more popular as a tool for judging job applicants as well.

The mortgage lending sector has become tougher on consumers of late, demanding higher credit scores in exchange for the best rates. It must be noted, however, that those rates have reached record lows in recent weeks.

Whether seeking a new mortgage, refinancing, or even a new job in the down economy, consumers would be well-advised to keep a close watch on their credit reports. The threat of identity theft - which affects millions of Americans every year - should be enough reason on its own to impose some regimen of credit monitoring.