Fannie Mae Knew About Allegations Of Improper Foreclosures In 2003: Government Report

WASHINGTON — Mortgage giant Fannie Mae knew about allegations of improper foreclosure practices by law firms in 2003 but did not act to stop them, a government watchdog says.

Similar allegations are the subject of a probe by state attorneys general into how lenders and law firms ignored proper procedures to handle a crush of foreclosure paperwork.

An unnamed shareholder warned Fannie Mae of alleged foreclosure abuses in 2003, the inspector general for the agency that regulates Fannie says in a report being released Tuesday.

Fannie Mae responded by hiring a law firm to investigate the claims in 2005. The law firm reported in 2006 that it had found foreclosure attorneys in Florida "routinely filing false pleadings and affidavits."

Fannie officials said they told a government official about the law firm's findings in 2006. That unnamed official, who now works for Fannie's regulator, the Federal Housing Finance Agency, said he couldn't recall the conversation, the report says.

Fannie began using a network of attorneys in 1997 to help handle foreclosures, evictions and bankruptcies. In 2008, the network grew to 140 law firms. And the number of foreclosures in Fannie's portfolio reached historic highs. Foreclosures more than doubled from 2007 to 2008. They grew 50 percent in 2009.

In June 2010, FHFA officials went to Florida to study the foreclosure crisis. They found that the mortgage industry was overwhelmed by foreclosures; that the average foreclosure processing time had grown from 150 days to more than 400 days; that lenders were beset by flawed documentation; and that law firms weren't devoting enough time to cases.

The worst practices, known collectively as "robo-signing," led some lenders to suspend foreclosures last fall. And it led to an ongoing investigation by all 50 state attorneys general.

Several states, including California, Delaware and New York, oppose a proposed settlement with the lenders. They complain that the lenders would receive unfair immunity from civil litigation under the deal.

Fannie and its sister company, Freddie Mac, own or guarantee about half of U.S. mortgages. That equals nearly 31 million loans worth more than $5 trillion. And they account for nearly all new mortgages.

The Bush administration seized control of the mortgage giants in September 2008, hoping to stabilize the housing industry.

The inspector general's report says FHFA plans to change its oversight policies by the end of 2012. The report is among several government inquiries into the aftermath of the housing crisis.

A broader report into missteps by Fannie and Freddie is expected this fall.

Comments

[Jean Michel LeTennier]

12:20 PM on 10/10/2011

and so the Foreign investors ask for their MONEY BACK.. and the FEDERAL RESERVE and their Minons, (CITI, JPMORGAN, B0F A and WELLS) tell them to go Foreclose on the properties if they want their money back.. So here is where it gets to us.. the ony way to remove a LOAN Number from a TRUST is to Liquidate it (essentially Sell it to the highest bidder) and this is how the Foreign banks are getting bilked of all their Dollars, and attempting to recoop their losses and we are being handed over to what amounts to FINANCIAL BOUNTY HUNTERS, to Chase and Harrass us for 15 cents on the Dollar.. Now if you consider how many banks in over 100 Countries they have done this to, using the AMERICAN HOME OWNER as a GUARANTEE of payment for their FRAUD, we are looking at a world war of pissed off people and the AMERICAN CITIZEN is left holding the DEBT, THE reputation and the ANGER of the PLANET .. And this is where allof you need to understand, the TRUST cannot Foreclose on you or anybody, since they have NO BASIS( a ZERO BALANCE 0$) in the TRUST, so how can they possibly have standing? ANS: they can't..

[Jean Michel LeTennier]

12:19 PM on 10/10/2011

Imagine you are a BANKER. you just lent a MORTGAGE for 400k at 10% to some schmuck.. Now you are holding 400k of capital, you then create a TRUST, to which you split off the NOTE(principle) from the REVENUE of the NOTE(client Mortgage payment), you Keep the 400k principle(convert it to a Certificate) , but commit the Revenue to the TRUST. In that TRUST you create 7 BONDS @ 400k each. Now you approach several Foreign banks and SELL Them 2.8 Milllion $ of BONDS paying an average interest rate (Coupon) of 1.6% Basically spliting up the Revenue.. In that TRUST is a Referral Number of your LOAN Number pointing back to MERS (telling you where the NOTE(Principle is held), but it really doesn't exist since it's been converted to a Certificate.. but your HOME is listed as the ASSET through the LOAN NUMBER. This Brings us the Answer to the question. "HOW DID WE GET HERE?" Can you imagine a 700%+ plus return on your money in only weeks time? and you get to keep the principle? GREED.. But it get's better.. These Foreign banks believed they were buying NORMAL BONDS(much like US Treasuries) but not so, since there is no PRINCIPLE in the TRUST, only the referance to a LOAN number.. So as these LOAN started to go bad, some 40% now, the TRUSTS can no longer pay their agreed to COUPONS,

[Hypocrites are Watching]

09:41 AM on 10/06/2011

Will the right people be reprimanded/fired!?

[Kyle Ransom]

08:22 AM on 10/06/2011

See what greed to can do?

[Kritikos]

08:11 PM on 10/05/2011

Fannie Mae--sounds like the name of a madame running a house of ill repute!

[dadx30]

05:55 PM on 10/05/2011

We can troll each other to death on this subject. Each team can find "gotcha" moments where it appears that "this event" is the reason the Housing MArket took a dump.

The truth is, like all financial bubbles, everyone was making too much money and everyone was way too happy to be the guys who popped it.

The Housing Market crash can't be blamed on just one Prez, or just one Congress, or just one bad loan. Millions of people contributed to it globally and now billions of people globally are suffering for it.

During the mid 2000's didn't anyone stop and remeber that if it's too good to be true than it probably isn't?

[GetRealSoon]

07:26 PM on 10/05/2011

During the mid 2000's didn't anyone stop and remember that if it's too good to be true than it probably isn't?

too good to be true than it probably is.

But agreed. So why didn't all those banks and lenders think about that when they were approving all those loans.

[MOTurkeyLeg]

02:29 PM on 10/05/2011

Well of course they did.

[jr3houpe1849]

12:05 PM on 10/05/2011

Fannie mae was not alone bush was told what was coming two years before it happened

[OAK STREET MAFIA]

09:47 AM on 10/05/2011

Can I stop paying Sallie Mae then? Aren't they related?

[Carolab]

03:53 AM on 10/06/2011

NO.

[Dan Slander]

08:26 AM on 10/05/2011

Thank you Barney Frank. He's a big player in this but a media sacred cow. It's the reason no investigation into his relationship with FM was never conducted.

[Carolab]

03:54 AM on 10/06/2011

Blah blah burp blah

[Dan Slander]

08:04 AM on 10/06/2011

Good response, sound like a Barney buddy.

[JacksonAndy78]

04:05 AM on 10/06/2011

SUCH BS! FRAUDSTER BRIBED CONSERVATIVE POLITICIANS CREATED THE FRAUD OPENINGS!

[Dan Slander]

08:04 AM on 10/06/2011

Nice try but you'll never be able to separate Barney from Fanny.

[fineartgalaxy]

07:50 AM on 10/05/2011

As to why the so called "fiscal conservatives" feel that anything the banks may have done is acceptable and understandable, it is beyond explanation. As to why the same group feels that homeowners are at fault for causing the foreclosure mess, it is beyond common sense. And when the same group feels that unemployed people are unemployed because they are lazy and they do not want to work, well, that is plain and simply the two most primal emotions: fear and hate.

[PARepublican]

07:19 AM on 10/05/2011

Why is Obama protecting F

[IMissAmerica]

07:53 AM on 10/05/2011

Republicans will soon be extinct thanks to Occupy Wall St!

[moutonnoir]

08:56 PM on 10/05/2011

Cmon... Democrats are easily the exact same thing on most of the major financial issues, which are the stated grievance of Occupy Wall Street.

I am a socialist, I strongly support and admire the occupy people - and i definiately want and expect to see tea partiers, libertarians, moderate republicans, and all sorts of inbetween join the occupies.. They are being as careful as they can to keep this a populist issue - and labor groups aside - it is a no-brainer.. Lots of overlap in interest and goals between occupy and the 99% that includes all the republicans except that top 400 or 1000 or whatever 'aristocrats'

[neocom43]

03:03 AM on 10/05/2011

I wonder if these left-wing spoiled socialists loons protesting on Wall Street about "corporate greed" will do likewise towards governmental boondoggles like Freddie and Fannie.

[fineartgalaxy]

07:43 AM on 10/05/2011

They already did. I grew up in a communist country and I can clearly see that you really have no clue whatsoever what a "left-wing socialist" person might be.

[Joseph Veverka]

08:38 AM on 10/05/2011

Excuess me, lets try more accuracy here. A left winger in the socialist party is not the same as a left winger in a democarcy. The difference is the cultural pressures.
Since you grew up under communism you should knew the public pressure is much greater here. Its a matter of we have to pay for here, instead of we are entitled to everything. However the GOP seems to be acting like an inverse societist state. Instead of entitlements for everyone the gop believe in entitlements for the wealthy only. I could be wrong but thats the way socist party evolved into. Wealth vs poor. Strange that should happen in a society that shuns capitialism.

[ColoradoCool]

02:47 AM on 10/05/2011

Of COURSE they did!!! Duhhhh!!!

[Lovebunnykiki]

12:43 AM on 10/05/2011

No Mention of Barney Frank???? WOW