In a letter addressed to Treasury Secretary Timothy Geithner, several house Democrats requested that Fannie Mae suspend its new policy to bring deficiency judgment lawsuits against underwater homeowners who “strategically default” on their mortgages.
The House Democrats state they are concerned about Fannie Mae’s new policy because it is “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 U.S. Treasury has already invested $86 billion into Fannie Mae and, considering Fannie Mae’s dependence on federal dollars to exist and operate, we think pursuing expensive litigation against a vulnerable population when there appears to be little to no economic incentive is questionable at best.” Additionally, the representatives are concerned that “it is unclear what transparent, objective criteria Fannie Mae is using to determine who is a strategic defaulter and who is not.”
The letter was signed by Representatives John Coyers, Jr. (D-MI), Marcy Kaptur (D-OH), Raúl Grijalva (D-AZ), Steve Cohen (D-TN), Barbara Lee (D-CA), Zoe Lofgren (D-CA), and Michael Honda (D-CA).
In June, Fannie Mae announced a new policy to pursue strategic defaulters. Borrowers who do not complete a foreclosure alternative workout in good faith would be ineligible to receive a new Fannie Mae back loan for seven years.
Joshua D. Carlson, Esq.