Freddie And Fannie Knew Of Bad Practices In 2003
A government report says that Fannie Mae was aware of improper foreclosure practices as far back as 2003 but failed to do anything to stop them, according to Investment News. Over the years, the number of firms used to handle foreclosures has increased along with the number of foreclosures. Fannie Mae started using firms to assist with foreclosures, evictions and bankruptcies as early as 1997. As the number of foreclosures exploded, the number of firms in the network was up to 140 law firms. From 2007 to 2008 the number of foreclosures doubled and in 2009 they grew 50%.
The inspector general has indicated in his report that the Federal Housing Finance Agency (FHFA), Fannie Mae's regulator, is going to revamp its oversight policies by 2013. According to the article, Fannie Mae hired a law firm to look into allegations that foreclosure abuses were going on as far back as 2003. The firm reported that it found "foreclosure attorneys in Florida routinely filing false pleadings and affidavits." Allegedly, Fannie Mae reported the findings to the government but that official stated that he could not recall such a conversation.
FHFA officials were called to Florida to analyze the foreclosure situation. The results were that the processing time had grown to over 400 days, up from 150, as the mortgage lenders were overwhelmed. The most egregious practice was the "robo-signing" of foreclosure documents, which has resulted in massive settlements with lenders.
Fannie Mae and Freddie Mac were taken over in 2008 by the U.S. government under the Bush administration during the financial crisis. They guarantee some 31 million mortgage loans worth over $5 trillion, or roughly one half of the mortgages in the U.S. It is expected that a follow up FHFA report coming out by year end will provide further insight into Fannie and Freddie and what they knew leading up to and during the financial crisis.