GSEs Failed to Pursue Judgments on Foreclosed Borrowers, Watchdog Says
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A bipartisan bill to reform the mortgage finance system being crafted in the Senate has already drawn praise from a variety of stakeholders, but the effort is almost certain to meet strong resistance from House Republicans.June 12
Fannie Mae and Freddie Mac failed to pursue and collect deficiencies from foreclosed borrowers who had the ability to repay, according to an inspector general's report released Tuesday.
A deficiency exists when the proceeds of a foreclosure sale are less than the borrower's loan balance. Many lenders continue to track down borrowers long after a foreclosure or they sell the debt to a third party that tries to collect a deficiency judgment.
The Office of Inspector General for the Federal Housing Finance Agency, which oversees Fannie and Freddie, released two reports detailing how the government-sponsored enterprises failed in their oversight of debt collectors. But the IG admits that only a portion of the deficiency claims would have been recoverable anyway.
Freddie Mac did not refer nearly 58,000 foreclosures with estimated deficiencies of $4.6 billion to debt collectors. Delays limited Freddie's ability to collect on another 6,000 foreclosed mortgages because statues of limitations had expired. Fannie Mae's debt collectors failed to pursue or ceased action on 44,652 borrowers because states' statutes of limitation had expired or were about to.