"There is going to be great wailing and gnashing of teeth among those homeowners.."
There may also going to be great wailing and gnashing of teeth among us taxpayers. I wonder how much liability Fanny & Freddie are on the hook for?
Where Freddie and Fannie could be on the hook, are areas where you have seen large property appreciation and borrowers in turn have converted that equity into debt via cash out refinances and 100% purchase loans. I have seen loans made to folks who now owe $50-60,000 more on their homes than what they purchased them for 3-4 years ago. These loans are approved by Fred and Fan via their computer scoring sytems and once the loans are closed sold to them. There are a lot of new cars on the highway today that owners will still be paying for years after they have found their way to the junkyard. The amount of current mortgage debt that has to be repaid is unprecedented, how these loans perform will be interesting.