Fannie Mae and Freddie Mac are looking to collect unpaid mortgage debt from “strategic defaulters,” those underwater home owners who skipped out on their mortgages even though they had the ability to pay.
If a home is sold at foreclosure but the proceeds don’t cover the outstanding balance of the home owner’s loan, the mortgage giants can pursue judgments against the home owner forcing him or her to pay the deficiency. And the Federal Housing Finance Agency, which regulates Fannie and Freddie, is pushing them to step up their efforts to do just that.
The FHFA says Fannie and Freddie haven’t been aggressive enough in going after strategic defaulters, and the inspector general’s office notes that the GSEs could cut their losses by making it more of a priority. The inspector general’s office estimates that Fannie and Freddie could recoup billions of dollars if they made strategic defaulters pay up. So far, the office has found that Freddie Mac did not refer 58,000 foreclosures — estimated deficiencies of $4.6 billion — for collection.
Some states do not allow deficiency judgments, but in more than 30 states and the District of Columbia, they are permissible. The FHFA says it will more closely monitor how effective Fannie Mae and Freddie Mac are in collecting deficiency judgments.
Source: “Fannie Mae, Freddie Mac to go after more strategic defaulters,” The Los Angeles Times (Oct. 13, 2013)