Fannie Mae Internally Reported Foreclosure Abuses In 2006

Fannie Mae was warned in a 2006 internal report of abuses in the way lenders and their law firms handled foreclosures, The Wall Street Journal reported on Thursday.

Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) have both been under investigation since September 2008 for their role in the mortgage crisis.

The 2006 report said foreclosure attorneys in Florida had "routinely made" false statements in court in an effort to more quickly process foreclosures, The Wall Street Journal reported.

The report said Fannie Mae officials "believe foreclosure counsel are sacrificing accuracy for speed" but did not name any firms, the Journal said.

The internal document also raised questions about whether some mortgage servicers or another entity had the legal standing to foreclose, the newspaper said.

The Fannie Mae report found no evidence that borrowers were improperly placed in foreclosure, The Wall Street Journal said.

"Fannie Mae took the necessary steps to address the specific issues identified by the 2006 report and regularly evaluates and enhances oversight of its retained attorney network," a spokeswoman for the government-controlled firm told the newspaper.

The U.S. Treasury took control of Freddie Mac and Fannie Mae at the height of the financial crisis in September 2008 as losses mounted from mortgages gone bad.

(Reporting by JoAnne Allen; Editing by Gary Hill)

Copyright 2011 Thomson Reuters. Click for Restrictions.

Comments

[james rimes]

01:48 AM on 03/28/2011

Fannie Mae can't report ANYTHING..Who at Fannie Mae reported what?
Why aren't people going to jail as a result of Fannie Mae.OB??

[ShariOlefsonesq]

11:56 AM on 03/27/2011

Is there anyone who thinks FNMA didn't know what was going on in the foreclosure mills all along? FNMA representative were at the 'scenes of the crimes' on a regular basis.The GSEs have always played an important role in setting an example and establishing industry-relevant frameworks, expectations and protocols. In this case, the GSEs established flat fees and maximum timeframes for completing the various steps involved in residential foreclosures. The theory was that quick low cost foreclosures benefit everyone - including homeowners who in recourse states are on the hook for the bank's foreclosure fees and costs. The problem was everyone knew that handling those cases within the fee and time constraints established by FNMA - which the banks followed suit in requiring as well - meant hiring low paid clerical level folks to do most of the work and cutting time-consuming, costly corners (enter the robo-signer). Not only did FNMA know about the issues, FNMA establshed - albeit not necessarily with ill intentions - the circumstances that lead to the issues. And now we're looking at 27 pages of AG 'settlement terms' that far exceed the scope of the robo-signer issue the AGs were investigating but still don't address these flat fee and completion deadlines that lead to robo-signing in the first place.

[riisacoff]

10:32 AM on 03/26/2011

Working with mortgages and homeowners as an attorney, mortgage banker, mortgage brokerage counsel, and bankruptcy counsel trying to stop unecessary and undeserved foreclosures, I can state that the abuses by law firms pale in comparison to the abuses servicers (I have employed and sued both).

In the past 18 years I have filed nearly 1000 bankruptcies, business and personal, and have had to deal with the "documentation problem". The shortcuts in 2005&2006 were minimal compared to today, where MERS creates its own reality. I am reminded of Dorothy in the Wizard of Oz clicking her ruby shoes together and suddenly waking up to the harsh reality that she is home - and in fact, never left. MERS clicks its heels together and expects us to become part of its "fictional reality".

MERS is like PT Barnum, and yes, it's like a circus trying to navigate through securitizations with MERS as the Point Guard. I feel like the Washington Generals playing the Globetrotters.

The real documentation problem is the back-dating, falsified affidavits, mail room personnel being listed as "Vice President MERS" signing 500-1000 documents a day, and even if they read the docs being signed, they wouldn't have a clue because the important underlying documents are never presented for inspection. In the army, when there was a draft in place, the slogan "If you can hear thunder and see lightning, you're in" ruled. With mortgage servicers it's "If you can sign your name you're a Vice President of MERS"

[Mr Hankey]

03:50 PM on 03/25/2011

For anyone sticking up for banks/servicers, and still thinks defaulting homeowners are wrong -
here's a video - towards the middle/end of this, Atty Vanessa G. Fluker talks about the servicer getting paid the full original loan amount through foreclosure (at around 3 min in):

http://www.youtube.com/watch?v=VDjwsmyd2Z8

[BBackSoon]

01:40 PM on 03/25/2011

I never have heard, just how many mortgages went bad?

I have tried to find this info but never can.

How much of the total mortgage market went bad? And by go bad what does that mean>

If someone can't make their note, they have to give up the home correct? So the bank now owns the property, They are out some interest but generally the value of the home should satisfy the principle. Some states even require the home owner to pay the short amount when the home is sold.

So if say 2% (as an example) of the homeowners all go belly up on their loans at the same time, and this causes a problem with the National Banking structure, It sounds like to me that the banks Over Lent.

Or is that what Fanny and Freddy did, was guarantee this type of lending?

[concerned21 2]

11:58 AM on 03/25/2011

its amazing to read this and then read on another day how the OCC reports no problems with the loans they have reviewed. maked you wonder who hand picks the loans for reveiw?

[msbeal]

11:32 AM on 03/25/2011

People believe if we can 'scr.ew' the banks the loss will come out of banker's pockets. It simply doesn't work that way. The bulk of the money used to issue a home mortgage came from other ordinary Americans, teachers, auto mechanics, etc.

Yes there are other less sympathetic investors too. China and Europe invested a great deal of money in America's secondary mortgage markets.

When you stop paying your mortgage in full you lose the house. That's the deal. I definitely believe we need to help people out of these tough times but not specifically for defaulting on their home loans.

And, I surely don't believe people who lent their life savings, through banks, into the mortgage market should suffer anything what so ever. These are people who didn't play the market but simply got up every day, went to work and deposited their excess in savings accounts.

Coming to the aid of defaulters because Ts weren't crossed or I's weren't dotted is silly. And cranking botched-up red tape with high falutin words like 'Fraud' mischaracterizes what's happening here.

A few defaulters have no problem destroying our home loan sector for their own short term gain. You dry the money up for home loans and you'd be amazed how low our home values could drop. For what, to save a few deadbeats?? No way.

[GeneralJustice]

11:54 AM on 03/25/2011

The banks tried to wrongfully foreclose on US military families....they are deadbeats?

[msbeal]

02:43 PM on 03/25/2011

I'm sure there were a lot of nice people caught up in that greed-stampede but it's my POINT that's important, not the semantics.

[Mr Hankey]

03:45 PM on 03/25/2011

Don't forget that servicers told homeowners that they MUST default to apply for loan modifications like HAMP.

[GeneralJustice]

11:00 AM on 03/25/2011

If Fannie Mae owned or guaranteed these mortgages that were apparently foreclosed upon, then the organization, its board, and chief officers should be held legally liable for aiding and abetting a fraud. They should have curtailed loan servicing abuses back in 2006. Now we face a muddled housing crisis and unfortunately our President is not taking any decisive action to punish the wrongdoers- namely the BIG BANKS.

[concerned21 2]

12:00 PM on 03/25/2011

this appears to have been a "cover up" for many years. no wonder the "feds" want to hurry up and end the current investigations and settlements

[Kevin Atlanta]

10:19 AM on 03/25/2011

Let's see now; America's Citizens Own Freddie and Fannie now as a result of the Heist of History and with the Documentation of the Control Fraud perpetrated to enable the Wall Street Embezzlement that paid off handsomely in TARP bonuses for destruction of the global economy.

Here's a solution that not one of the Wholly Owned Subsidiaries on CapitAl Hill seem to hear:

1) Roll Fannie and Freddie up into "The American Home Bank."
2) An immediate moratorium on home foreclosures
3) All the issues of the creation of Control Fraud by the Banksters cleaned up, the forced short-sale of underwater homeowners to an amount equal to current market upon re-finance with "The American Home Bank.
     A) This places the cost of the created bubble back upon those who created it.
     B) Provides equitable solution to market manipulation by Bankster and Wall Street collusion.
4) Migrate the Social Security Trust fund into this American Home Bank to create certificates of deposit for every Citizen paying dividends into these accounts, having real cash value and available for loan against collateral for new primary home ownership, new business start-up or continuing education.
5) End the private banking cartel control of this economy by ENDING THE FED.

[Apathy Man]

10:36 AM on 03/25/2011

This might work but it will never happen. To many of our congressmen are completely owned by the banks. (the republican party), while the others are on a rent to own plan.( the Democratic party). Until and unless that changes, the public will be the losers in these situations.

[blueken]

10:12 AM on 03/25/2011

I think it's important to understand that these are the "experts" that tell you you "just don't understand". I see way to much hero worship of the "captains of industry". Take a close look, the emperors have no clothes.

[Christopher Neuhart]

09:11 AM on 03/25/2011

I like PONZI SCHEME myself.

[Darlie Brewster]

09:10 AM on 03/25/2011

IT found no evidence of improper foreclosures but there was , widespread! evidence ! Why didn't they know ? They got their info FROM THE BANKS FORECLOSING!

[Mr Hankey]

09:00 AM on 03/25/2011

By abuses, I think you mean FRAUD.

[Apathy Man]

10:22 AM on 03/25/2011

Fraud is such a strong word. They prefer to think of it as leveraging the homeowner for everything the have.

[Kevin Atlanta]

10:23 AM on 03/25/2011

Semantics are everything in Orwellian double-speak sanitized presentation.

[s0uthparkc0nservative]

02:44 PM on 03/26/2011

That's easy to say but the truth is that everyone in power, Republican and Democrat alike, are responsible for the failure of Fannie Mae. FDR started it, LBJ privatized it (making it free from the federal budget), and Clinton and Bush signed off on it. It's not a conspiracy so much as an astonishing lack of foresight.