Freddie dropped the ball on $4.6 BILLION in mortgage collections

by Ryan Smith26 Sep 2013

Freddie Mac didn’t bother going after homeowners who owed about $4.6bn on their loans, according to a report released yesterday by a federal oversight agency.

The company, which was put in government conservatorship after nearly collapsing in 2008, failed to refer nearly 58,000 foreclosures to its deficiency collection vendors, who could have evaluated the borrowers’ ability to repay and possibly collected on those deficiencies, according to a report released Tuesday by the Federal Housing Finance Agency’s Office of the Inspector General.

“Because the deficiencies were not referred for consideration of recovery, the portion of the $4.6 billion that may have been collectible is unknown,” the OIG report stated.“Further, Freddie Mac eliminated any possibility of recovery when it did not refer foreclosed mortgages for evaluation of collectability.”

Between January of 2010 and June of 2012, Freddie Mac saw 220,000 foreclosures on mortgages it backed, resulting in about $19.6bn in deficiencies, according to the report. Nearly half of those foreclosures couldn’t be pursued because of state laws. Of the remaining 117,000 foreclosures, Freddie failed to refer 58,000 for collections evaluation – all in states that allow collectors to pursue deficiency judgments.

“This occurred primarily because Freddie Mac employed inadequate policies” to ensure collections, according to the report.

“As a result, Freddie Mac’s vendors missed the opportunity to evaluate the collectability of $4.6 billion in estimated deficiencies,” the report stated. “Although only a fraction of these deficiencies may have been recoverable, pursuing deficiencies could have mitigated some credit losses and served as a deterrent to borrowers who may consider strategically defaulting.”

But failures like Freddie’s don’t only mean that the government loses out on some money. According to J. Scott Harris, vice president on business development and recruiting for Gold Financial Services, such oversights can also hurt the very borrowers Freddie failed to collect from.

“It’s somebody dropping the ball, and it keeps the whole country from moving forward. Real estate’s what’s driving the economy, and if we can’t make loans to people who could have and should have been able to move forward, we’re in trouble,” Harris said. “The sooner all of that is through the system and done with, the sooner people can rebuild their credit and move on.”

COMMENTS

  • by Cary Michael | 9/26/2013 9:42:00 AM

    They found it eaiser just to raise GSE fees and screw the people that pay their mortgages on-time and fulfill their obligations.

  • by Bayview Mortgage Inc. | 9/26/2013 11:06:44 AM

    The story said, it's vendors lost the ability. Obviously freddie was tired of waisting money on collections that don't work. Who cares if the collection agencies lost money. Freddie was probably tired of selling the debt for pennies on the dollar. In my opinion. Any creditor that sells a debt for pennies on the dollar should loose 100% of the tax write off.
    Anyone that has a foreclosure. Should automatically file a Bankruptcy. This way the lender and the mortgage insurance company can't collect.

  • by Al Bojorquez | 9/26/2013 11:25:13 AM

    J. Scott Harris doesn't know what he's talking about. Not completely. It isn't only the poorly qualified have gone into foreclosure.

    This ignorant government with the help of the even more stupid Barney Frank and the rest of his financially clumsy associates ruined the real estate and mortgage markets.

    Real estate agents and mortgage professionals with decades of experience are losing their homes to foreclosure, short sale and the like due to fact that the government idiots obliterated the economy and the real estate market.

    These professionals, in a normal market, would have easily been able to continue paying on their mortgages.

    But now they've gone through their savings and retirement funds paying for their mortgages and every day living expenses hoping the market would recover soon enough to keep their homes.

    It didn't and the government idiots get to keep their jobs and keep their over paid and undeserved salaries while the citizens of American go down in flames.

    Thank you government, thank you Barney Frank and all of your moronic friends!!!

    This government induced economy from hell, not necessarily poorly qualified buyers brought on the foreclosures. So, Harris, get the facts straight, although you might be a socialist, it's the government stupid!

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