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FHFA IG Foreclosure abuses reported as early as 2003
WASHINGTON (10/5/11)--Government-sponsored mortgage giant Fannie Mae was informed of foreclosure abuses, including the filing of false pleadings and affidavits, as early as 2003, but Fannie Mae’s overseer, the Federal Housing Finance Agency (FHFA), did not officially act to address these types of actions until 2010, the FHFA’s Office of the Inspector General (OIG) reported on Tuesday. An outside law firm that was hired by Fannie Mae to follow up on reports of abuses that were made in 2003 found that “Fannie Mae did not take steps to ensure the quality of its foreclosure attorneys’ conduct, the legal positions taken in the attorneys’ pleadings, or the manner in which the attorneys processed foreclosures on [Fannie Mae and Freddie Mac’s] behalf,” the OIG said. The outside law firm advised Fannie Mae to stop the practice. While Fannie Mae claims to have addressed these issues in a later discussion with the Office of Federal Housing Enterprise Oversight (OFHEO), there is no record of this contact, the FHFA OIG said. (OFHEO was the regulatory body that was the precursor to FHFA.) The OIG found that Fannie Mae continued to fail to act as press reports and consumer complaints of foreclosure abuses mounted in 2008 and 2009. Further, the OIG report said, the FHFA did not conduct its own internal investigation of the foreclosure abuses, which also said included creating and filing incomplete and improper documents, fraudulent affidavits, improper notarizations and the use of robo-signing to process foreclosure documents, until heavy media reporting on these issues began in 2010. The OIG in its report said that the FHFA “had not considered risks associated with foreclosure processing to be significant, and, instead, had focused its limited examination resources on assessing high risk areas such as [Fannie Mae and Freddie Mac’s] management of credit risk.” Overall, the OIG report found there “were multiple indicators of foreclosure abuse risk prior to 2010 that could have led FHFA to identify and act earlier on the issue.” To correct these issues, the OIG suggested that the FHFA enhance “its capacity to identify new and emerging risks,” create and implement new guidance and supervisory plans for default-related legal services, and “develop and implement policies and procedures to address poor performance by default-related legal services vendors” that work on behalf of Fannie Mae and Freddie Mac. For the FHFA release, use the resource link.
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