Wednesday, October 16, 2013
‘Strategic default’ ex-owners face debt collectors
If a home is sold at foreclosure but the proceeds don’t cover the outstanding balance of the homeowner’s loan, the mortgage giants can pursue judgments against the homeowner forcing him or her to pay the deficiency. And the Federal Housing Finance Agency (FHFA) that regulates Fannie and Freddie is pushing them to step up their efforts.
FHFA says Fannie and Freddie haven’t been aggressive enough going after strategic defaulters; and, according to the inspector general, the mortgage giants could cut their losses by making it a priority – billions of dollars, the office says.
So far, the office says it has identified about 58,000 foreclosures that Freddie Mac did not refer for collection – and estimated deficiency of about $4.6 billion.
Some states do not allow deficiency judgments, but in more than 30 states and the District of Columbia, they’re permissible. Florida is one of the states that allows Fannie Mae and Freddie Mac to seek repayment of lost funds.
Going forward, 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)
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