Certified Forensic Loan Auditors, LLC

 
  Upcoming Classes

Search CFLA's Article Archive:

Fannie Mae, Freddie Mac to go After More Strategic Defaulters

latimes.com | October 13, 2013

By Lew Sichelman

The Federal Housing Finance Agency is pushing Fannie and Freddie to chase down borrowers who can make home loan payments but choose not to.

Anyone thinking of skating on mortgages owned by either Fannie Mae or Freddie Mac may want to think again. As a result of new government reports, the two companies say they are going to do a better job of going after so-called strategic defaulters.

Fannie and Freddie can pursue judgments against borrowers who walk away from their loans even though they have the ability to make their payments. That's called a strategic default, and many borrowers are taking that step — typically throwing in the towel because their homes are no longer worth as much as they owe.

But when their homes are sold at foreclosure and the proceeds are not enough to cover their outstanding loan balances, it creates a deficiency for which many defaulters either don't realize they are liable or don't care.

To date, the two government-sponsored enterprises, which are now highly profitable after five years of running in the red, haven't done a particularly good job at pursuing deficiency judgments, according to scathing reports from the Office of the Inspector General at the Federal Housing Finance Agency.

But the FHFA says it is going to make the GSEs clean up their acts. And that should serve as fair warning to those who can pay but fail to do so.

As the inspector general's office says time and again in the reports, chasing down strategic defaulters can not only cut the enterprises' losses on bad loans but can also "serve as a deterrent to those who would chose to strategically default on their mortgage obligations."

Going after strategic defaulters is big money. According to the report by the inspector general's office criticizing Freddie Mac's lax practices, the company has left billions on the table.

The report found that Freddie Mac, which has received some $71 billion in taxpayer assistance since it was taken into conservatorship by the FHFA in September 2008, did not refer nearly 58,000 foreclosures with estimated deficiencies of some $4.6 billion for collection by its vendors.

Of course, only a percentage of that amount might have been recoverable because some borrowers are simply tapped out. But because the bad loans weren't even considered for recovery, Freddie Mac "eliminated any possibility" for collecting what is owed, the report said.

Now extrapolate that to Freddie Mac's entire holdings and you can see we're talking some really big money here. As of December, the big secondary mortgage market company had nearly 50,000 foreclosures still on its books, carrying a value of some $4.3 billion. And as of March 31, it held 364,000 mortgages that were 60 days or more delinquent and were, therefore, likely foreclosure candidates.

Fannie Mae's portfolio of troubled assets is much larger. At the end of last year, it owned more than 105,000 foreclosed properties valued at $9.5 billion and carried a "substantial" shadow inventory of 576,000 seriously delinquent mortgages that were 90 days late or more and likely to end up in foreclosure.

It does a better job than the smaller Freddie Mac, according to the inspector general's office. But in a separate report, Fannie Mae earned a slap on the wrist for not taking any action on nearly 30,000 accounts because statutes of limitation had expired or were about to. For the same reason, the report says, it failed to pursue deficiencies of some 15,000 accounts that already had been reviewed for collection by its vendors.

Several factors influence the decision to pursue deficiency recoveries. But most important, state laws dictate timelines for filing claims. Some states do not allow deficiency judgments at all, but they are fair game in more than 30 states and the District of Columbia. But 10 have short windows — only 30 to 180 days in which collections are allowed.

But not going after defaulters where it is permissible to do so not only reduces the chances of recovering potentially billions, the reports point out, it "incentivizes" other borrowers to walk away from mortgages they can afford to pay.

The new inspector general reports are a follow-up to one issued a year ago that called the FHFA, the agency that oversees Fannie and Freddie, on the carpet for failing to provide enough guidance about effectively pursuing and collecting deficiency judgments wherever and whenever possible.

In September, in response to a draft of these latest reports, the agency set down requirements for both enterprises to maintain formal policies and procedures for managing their deficiency collection processes, establish a set of controls to monitor their collection vendors and comply with state laws in an effort to preserve their ability to pursue collections.

And by the first of the year, the FHFA said it will begin to more closely monitor the effectiveness of Fannie Mae and Freddie Mac's deficiency judgment processes. That's government-speak for "We'll be watching you from now on, so you'd better get your collection house in order."

 

Back to October 2013 Archive

CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

SEE BELOW- http://www.certifiedforensicloanauditors.com

Call us toll free at 888-758-2352

Bookmark and Share
spacer
Facebook Like us on Facebook
Twitter Follow us on Twitter
YouTube View our YouTube Videos
LinkedIn Connect to us on Linkedin
 
BBB Logo

 

spacer
Contact us or view our Sample Documents & Audits by completing the form below.

  • Reload
  • Should be Empty:


 

DVD Sets Only $99

 

FREE Mortgage Fraud Analysis

 

Order Cutting-Edge Services Now

 

Quiet Title Packages from Licensed Attorneys

 

Affiliate Services

 

CFLA Sponsored Attorney Links

 

Take-Home Education Package

 

ALB Law Firm

 

Advocate Legal

 

The True News Network

 

Sutton Law Firm, P.L.L.C.

 

Rubenstein Business Law

 

Atighechi Law Group

 

Scunziano & Associates

 

Get Certified to Perform Mortgage Securitization Audits

 

CFLA Training Academy

 

Expert Witness Services

 

Cutting Edge Expert Securitization Reports

 

CFLA Credit Cards

 

Breaking News

 

Letters to the Editor

 

CFLA Weekly Newsletters

 

Code of Ethics

 

Testimonials

 

Instructional Videos

 

Job Opportunities

 

License Opportunities

 

MARS Rule

 

Product Samples

 

Resource Links

 

Servicer Information

 

Foreclosure Laws

 

REST Report

 

Quiet Title Packages from Licensed Attorneys

 

Advertise on CFLA

 

Advertising Space: Mortgage Securitization, Quiet Title

 

Certified Forensic Loan Auditors, LLC
13101 West Washington Blvd.
Suite 444
Los Angeles, CA 90066

Phone: 832-932-3951
Toll Free: 888-758-CFLA (2352)
Mobile Users: CLICK TO CALL
info@certifiedforensicloanauditors.com

   
 
CFLA IS NOT A LAW FIRM AND DOES NOT PROVIDE ANY LEGAL ADVICE. CFLA DOES NOT OFFER FORECLOSURE CONSULTING OR FORECLOSURE RELIEF
SERVICES. CFLA DOES NOT OFFER OR ASSIST WITH ANY LOAN MODIFICATION SERVICE. CFLA ALWAYS RECOMMENDS THAT CLIENTS RETAIN COMPETENT COUNSEL IN THEIR RESPECTIVE JURISDICTION. CFLA HAS A FREE PROGRAM TO REFER CFLA CLIENTS TO LAW FIRMS IN NEARLY EVERY STATE AND CFLA
DOES NOT CHARGE OR OBTAIN REFERRALS FEES FOR THESE SERVICES. SERVICES NOT OFFERED TO RESIDENTS OF THE STATE OF NEVADA.

 
Home About Us Privacy Policy Terms of Service Disclaimer SERVICES Careers Contact Us
 
COPYRIGHT © 2007-2016 Certified Forensic Loan Auditors ™ All rights reserved