Representatives Convey and Kaptur Call on Geithner, Fannie, FHFA to Stop Efforts to Pursue Strategic Defaulters

"As we’ve noted on this blog, the Administration efforts to punish so-called strategic defaulters seem hopelessly misguided. First, it’s well nigh impossible to tell with simple screens who really could afford their house longer term (ie people who default suddenly, as opposed to wobble in and out of being current on their mortgage before folding, are likely to be anticipatory defaulters, who see their financial train wreck coming and decide to take action). Second, as a corollary, there’s a good reason banks just about never pursue defaulting borrowers on recourse mortgages for deficiency judgments: it’s a costly exercise and you can’t get blood from a turnip. Third, many borrowers have found it difficult if not impossible to reach servicers and get consistent responses as to whether they can work out a mod. Finally, true strategic defaulters have in all likelihood organized their affairs (most important, getting financial reserves out of banks and securities firms) so as to make the efforts to punish them ineffective."