Fannie Mae and Freddie Mac will soon begin collecting punitive compensation from mortgage servicing companies that fail to properly handle troubled mortgages, a regulator said on Wednesday.
"The enterprises will be moving forward with servicer penalties for last year in the coming weeks," Edward DeMarco, acting director of the Federal Housing Finance Agency (FHFA) said in prepared remarks at a conference of mortgage servicers in Dallas that were posted on the FHFA website.
The number of so-called distressed sales, which include foreclosures and home sales where the buyer pays less than what is owed to the bank by the seller, rose in January to 37 percent of all sales, the highest in a year, the National Association of Realtors said Wednesday.
The inventory of homes held by Fannie Mae and Freddie Mac has risen sharply in recent months as many struggling homeowners were unable to get loans modified or to sell them outright.
The two firms blame some of the increased inventory on the mortgage servicing companies for acting too slowly. The servicing firms collect payments from borrowers and negotiate new terms for troubled loans.
As the inventory increased for the two firms, losses have risen. That money is eventually paid by taxpayers since Fannie Mae and Freddie Mac were seized by the Bush administration in late 2008.
The two firms have taken more than $130 billion in direct taxpayer aid, and the Obama administration expects the losses could peak at $169 billion before slowly shrinking.
© 2014 Thomson/Reuters. All rights reserved.