Fannie Mae executives bungled their stewardship of the federal government's massive foreclosure-prevention campaign, creating a bureaucratic muddle characterized by "mismanagement and gross waste of public funds," according to a whistleblower lawsuit by a former Fannie Mae executive and consultant.
Caroline Herron, a former Fannie vice president who returned to the mortgage giant in 2009 as a high-level consultant, claims that the homeowner-relief effort was marred by delays, missteps and executives preoccupied with their institution's short-term financial interests.
"It appeared that Fannie Mae officers were focused on maximizing incentive payments available to Fannie Mae under various federal programs - even if this meant wasting taxpayer money and delaying the implementation of high-priority Treasury programs," she claims in the lawsuit.
Herron alleges that Fannie Mae officials terminated her $200-an-hour consulting work in January because she raised questions about how it was administering the federal government's push to help homeowners avoid foreclosure, known as the Home Affordable Modification Program, or HAMP.
Fannie Mae signed a $113 million contract with the U.S. Treasury Department in February 2009 to administer HAMP. Fannie's leaders have acknowledged they face challenges in running the program, but have said "we are committed to getting the job done, which is to help as many borrowers as possible if they are struggling to make housing payments."
Fannie Mae declined to respond to specific questions from the Center for Public Integrity about Herron's allegations or about its administration of HAMP. In a written response, a Fannie Mae spokeswoman said Herron's attorney had "notified Fannie Mae in early March of her potential allegations. Upon learning of these allegations, Fannie Mae retained a former Inspector General of the Department of Justice to conduct an independent investigation. Ms. Herron was invited to participate in that investigation but she declined to do so. The investigation found no merit to her allegations."
The spokeswoman would not provide details of the investigation or a copy of the investigator's report. "Fannie Mae will not comment further to the press on the details of this pending litigation," she said.