Feds: Do-Nothing Fannie Mae Knew of Foreclosure Abuses in '03

But oversight will be 'tightened' by end of next year
By Mary Papenfuss,  Newser Staff
Posted Oct 4, 2011 12:55 AM CDT
Feds: Do-Nothing Fannie Mae Knew of Foreclosure Abuses in '03
Fannie Mae headquarters in Washington.   (AP Photo/Manuel Balce Ceneta)

(Newser) – Mortgage officials at Fannie Mae knew eight years ago of possibly illegal foreclosures by law firms they employed—but did nothing to stop them, according to a federal report. Fannie Mae's own investigation concluded that Florida attorneys were "routinely filing false pleadings and affidavits" to improperly foreclose on properties, reports the AP. Fannie Mae began working with private attorneys in 1997 to help handle a growing number of foreclosures, evictions, and bankruptcies. By 2008 the mortgage giant was working with 140 law firms, and foreclosures more than doubled from 2007-2008 alone.

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Fannie spokesmen have said they informed a government official about the findings in 2006, but that official has said he can't recall the conversation, according to the report by the inspector general of the Federal Housing Finance Agency, which is in charge of regulating Fannie Mae. Law firms engaged in unscrupulous practices to effect foreclosures as quickly as possible. One such practice—"robo-signing" of unverified information or using a fake signature—helped to trigger investigations by attorneys general in all 50 states. The federal report says the FHFA plans to tighten its oversight practices by the end of next year. Maryland Democrat Elijah Cumming, who called for the report, branded the "systemic failures by FHFA and Fannie Mae to adequately oversee these foreclosure law firms a breach of the public trust," reports the New York Times. (Read more robo-signing stories.)

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