Overhaul planned for Fannie, Freddie foreclosure-attorney network
Fannie Mae and Freddie Mac are a big part of the mortgage market. So it probably won't shock you to know that some of the robo-signing and general rule-breaking in foreclosure cases was done by mortgage servicers and attorneys handling Fannie and Freddie loans.
Now the federal agency overseeing the two mortgage financiers says they must make improvements to their current system for how their servicers select foreclosure attorneys, an announcement that comes after U.S. Rep. Elijah E. Cummings of Baltimore pressed for reform.
The Federal Housing Finance Agency said Tuesday that Fannie and Freddie must "transition away" from their current system of law firms approved for servicers' use to a setup in which servicers choose firms that "meet certain minimum, uniform criteria." The agency said that is in line with its April order that the two companies improve their requirements for servicers handling delinquent loans.
"FHFA believes these efforts will lead to greater transparency and benefit delinquent borrowers who become subject to the foreclosure process," the agency said in a statement.
An inspector general report released earlier this month, prompted by a request from Cummings, said the Federal Housing Finance Agency failed to stop abuses of struggling homeowners by Fannie- and Freddie-approved attorneys despite warning signs that not all was well.
Cummings, a Democrat, has been active in foreclosure-prevention efforts for years and was not happy to discover that a law firm accused of filing bogus affidavits in Maryland court cases was on the approved list. (So was another firm that acknowledged last year that it had done so.)
On Tuesday, Cummings said in a statement that some firms "were able to engage in abusive and illegal behavior that violated the rights of borrowers, in part because of deficient oversight by FHFA, Fannie Mae, and Freddie Mac."
The Federal Housing Finance Agency's statement is vague about what the new system could look like, saying only that changes will be made at some point after getting feedback "from servicers, regulators, lawyers and other market participants." (No idea if homeowners and former homeowners fall into that "other market participants" category. Here's the agency's contact information, if you'd like to add to the feedback.)
Cummings said the agency's explanation of next steps was insufficient.
"I remain concerned ... that FHFA has not provided specific details about how mortgage servicers will select and oversee law firms to ensure that abusive behavior is prevented," Cummings said in his statement.
Categories: The foreclosure mess
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