Beware strategic defaulters, the mortgage cops are coming.
The Office of the Inspector General (OIG) at the Federal Housing Finance Agency (FHFA) is a new federal law enforcement agency that is trying to find strategic defaulters and collect on what they still owe. Special OIG agents have the powers to search, seize and arrest — and they are even authorized to carry firearms.
The FHFA is the supervisory agency of the two government-owned enterprises, Fannie Mae and Freddie Mac. Since 2008, Fannie and Freddie have been under federal conservatorship. The OIG is a separate agency within FHFA that answers to Congress. Its mission is to root out fraud, waste and abuse within FHFA. The agency has 130 investigators, auditors, attorneys and prosecutors.
Since Fannie and Freddie are on the hook for $187 billion in taxpayer money that the Treasury pumped into the twin agencies, the OIG’s agents are on the prowl for people who owe it money. They work out of 11 field offices — soon to be 14 nationwide — and their gun-toting agents are looking for you if you’ve strategically defaulted — missed mortgage payments even if you could still afford to make them.
Experian estimated that 20 percent of all foreclosures are from strategic defaulters. The OIG estimates that strategic defaulters owe $1 billion to Fannie and Freddie, and they plan to criminally prosecute them.
“We’re not just going to demand repayment,” Heath Wolfe, OIG assistant inspector general for audits, told the Chicago Tribune. “We’re going to lock (people) up.”
The story goes on to note that OIG investigators are also searching for lenders who fraudulently sold bad loans to Fannie and Freddie.
If 20 percent of foreclosures are strategic and the OIG succeeds in its mission of identifying the borrowers behind those strategic foreclosures, then it could mean a lot of people could be locked up and more considering strategic default might consider a less risk alternative such as refinancing or short sale.
What do you think readers? Is the Office of the Inspector General wasting its time going after relatively petty housing fraudsters? Or should these homeowners be held accountable for not honoring the mortgage contract?
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