New penalty for Mortgage Defaulters

In the past year, we’ve noticed a significant uptick in subject locate service requests by clients chasing mortgage defaulters.

Every type of dodge (for averting service) has been employed: from occupying the home only late at night for sleeping, to renting the house to someone other than the homeowner while attempting to individually selling the house to simply abandoning the property.

In an effort to discourage homeowners from walking away from their mortgage responsibilities, government-sponsored mortgage buyers, Fannie Mae and Freddie Mac, have announced a new, tougher policy that will ban defaulters from obtaining new loans for seven years.

The policy is aimed at the troubled borrowers who refuse to make good faith efforts to work out a deal to repay their loans.

The justification for the new Fannie and Freddie penalty is meant to discourage strategic defaulting, (when a homeowner simply stops making mortgage payments although s/he has the capability to do so).

Strategic defaulting default has become alarmingly popular in neighborhoods experiencing sharp house value declines.  In turn, this wave of unprecedented foreclosures has devalued entire communities.

Fannie Mae and Freddy Mac together, own or guarantee roughly half of all mortgages – 31 million loans valued at $5.5 trillion.

The federal government seized control of Fannie and Freddie in 2008, sending taxpayers a $145 billion bill, so far.   Neither of these two companies exhibits any signs of being self-sufficient in the foreseeable future.

When BNI becomes involved in locating mortgage defaulters, we advise our clients that these are not standard locates.  The people we are attempting to find are actively avoiding just that.  Whether the defaulter is in denial or trying to sell the property and recoup his/her investment, repay the loan and potentially even make money on the sale, the sheer number and complexity of these locates has certainly changed the scope of how we definitively identify and trace this particular group of subjects.

Our focus had broadened to include uncovering relatives, friends, co-workers, current and past business associates… It is extremely rare that a person will simply disappear, especially those with children.  Our experience has been that mortgage defaulters on the run will generally live with relatives or friends, and not unusually, will move out of state (mistakenly believing that crossing state lines will somehow absolve their debt).

How long will it take for commerical and private mortgage providers to install harsher default penalties?  Probably within several months, and undoubtedly sooner than government agencies Fannie or Freddie actually enact their new penalty policy.

Cease and Desist

In related news, after investigating hundreds of consumer complaints, NYS Attorney General Andrew Cuomo stated that as of Jun 24, 2010, his office has issued 180 cease and desist letters to national mortgage rescue companies that misrepresent themselves by implying an affiliation with the federal government. 

What Went Wrong Here??

1,300 tax filers grabbed $26.7 million in tax credits from the federal first time home owners incentive meant to boost the sagging housing market.

So why is this an attention-grabber?  These 1,300 individuals are all behind bars.  A common  scam by these prisoners had multiple (alleged) tax payers purchasing a single home, with each claiming the tax credit.  One home was simultaneously “purchased” 67 times. 

The IRS states it is taking steps to take this money back.  Good luck.

BNI Operatives: Street smart; web savvy.

As always, stay safe.

Filed under: General Information, locate | Tagged: andrew cuomo, default, fannie mae, freddie mac, home, irs, loans, mortgage, pentalty, property | Leave a Comment »