House Dems Push To Suspend FNMA’s Strategic-Default Policy

Written by John Clapp
on September 02, 2010 No Comments
Categories : Mortgage Servicing

Calling Fannie Mae's decision to go after strategic defaulters an ‘opaque, overbroad and punitive policy,’ Rep. John Conyers Jr., D-Mich., has asked Treasury Secretary Tim Geithner and Fannie's regulator to suspend the policy until Congress has had a chance to review it. In June, Fannie Mae said it would pursue deficiency judgments, where allowable by state law, against borrowers the company believes intentionally fall behind on their mortgage.

Conyers and six other House Democrats sent a letter to Geithner and Federal Housing Financing Authority Acting Director Edward DeMarco this week asking them to immediately suspend the policy. The House members say the ‘vagueness’ of the policy will cause unnecessary harm by including actions against borrowers who do not choose to default on their mortgage.

‘At a time of record deficits and a nation crying for the government to get its finances in order, it is also unclear why Fannie Mae is proposing to use taxpayer dollars to pursue legal judgments against individuals who will lose or have lost their homes, have wrecked their credit rating, and likely have little or no remaining monetary assets,’ the letter says.

The lawmakers expressed ‘great concern’ with the policy because it puts the responsibility of determining a borrower's intention in the hands of servicers. The letter notes that government watchdog agencies have criticized servicer performance as it relates to loan modifications and the federal Home Affordable programs.

The letter was also signed by Reps. Marcy Kaptur, of Ohio; Raúl Grijalva, of Arizona; Steve Cohen of Tennessee; and Barbara Lee, Zoe Lofgren and Michael Honda, all of California.

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