Americans with foreclosed homes still having assets seized, wages garnished

A few years ago, an enormous sum of Americans lost their homes when the housing bubble came crashing down. They faced a tremendous foreclosure nightmare, but since the recession, many of these same people have started to rebuild their lives and personal finances. However, they’re still experiencing the post-foreclosure nightmare.

Reuters published an article Tuesday that looked at how debt collectors are still chasing down American consumers because of the money still owed to them. These debt collectors are freezing their bank accounts, seizing their assets and garnishing their wages, which is wreaking havoc for households across the country.

Indeed, financial institutions have likely sold these houses by now, but the price-tag hasn’t covered the full amount of the mortgage, penalties, legal fees and other costs associated with the loan.

Various lenders, including government-controlled housing finance companies, Fannie Mae and Freddie Mac, are contacting previous homeowners and encouraging them to pay back whatever amount of money that is still outstanding and defaulted on several years ago.

Known as deficiency judgment, borrowers are still troubled by the debts for years and sometimes decades. Prior to the economic collapse, banks and lenders often avoided the deficiency judgment because it was view as costly and could generate bad publicity for the firms. With approximately $1 trillion in foreclosed loans, banks are facing immense losses and have no other choice but to proceed, though some banks are still refraining from invoking the deficiency judgment.

Some organizations are coming forward and condemning the practice.

“This is monumentally unfair and damaging to the economy,” said Ira Rheingold, the executive director of the National Association of Consumer Advocates, in a statement. “It prevents people from moving forward with their lives.”

Others say, however, that most of the lenders are going after people who could’ve made a payment but decided not to do so, otherwise known as “strategic defaulters.” Also, these individuals present the case that the taxpayers suffered tremendous losses and are entitled to receive the money back.

“Fannie Mae and the taxpayers suffered a loss. We’re focusing on people who had the ability to make a payment but decided not to do so,” said Andrew Wilson, a spokesman for Fannie Mae.