I thought you were a little easy on Fannie Mae. If Berkshire originated the loans with the idea that Fannie was almost certain to buy them soon after origination, then Fannie is part of the problem and the debate then becomes over how big a part. When I was working for HPD back in the late ’80s; lenders who were selling loans to Freddie Mac were offering very generous refinance terms to borderline acceptable landlords of borderline acceptable buildings – the loan payments squeezed the operating budgets and the buildings and tenants suffered. To me, this practice is analogous to subprime lending to homeowners who had no business borrowing so much on such sketchy collateral. The difference is that the landlords are more sophisticated than the homeowners, but they may have been blinded by greed or took comfort in the attitude of “well the banker says the building can support this mortgage, then it must be OK.”

It is good to see that Fannie is more responsible than most lenders in minimizing the post-foreclosure damage; but given their (now-explicit, then-implicit) backing by the federal government, we should expect no less.

Dan Gaulin