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Friday, September 23, 2011

Fannie Mae was engaged in robo-signing home foreclosure documents, report cites

Half million dollar house in Salinas, Californ...                                Image via Wikipedia
Fannie Mae missed numerous chances to catch law firms illegally signing foreclosure documents and its government overseer did not take the right steps to ensure Fannie was doing its job. 

Instead of Fannie Mae catching bank law firms using the illegal practice of “robo-siging” documents for home foreclosures, it missed the mark for over five years, nearly condoning the practice.

The Federal Housing Finance Agency's (FHFA), inspector general office noted in the report released today, that Fannie Mae failed to establish an "acceptable and effective" way to monitor foreclosure proceedings between 2006 and early 2011. FHFA then failed to ensure it was complying with demands that it clean up its programs.

What was known is that mortgage industry employees signed documents they didn’t read and used fake signatures on foreclosure cases across the country. Unknown prior to the inspector general office release, was law firms employed by Fannie Mae were engaged in robo-signing documents. The practices resulted in a suspension of foreclosures in late 2010 and, investigations by all 50 state’s attorney’s general.

In 2005, Fannie hired outside investigators to look into allegations about faulty foreclosure documents. One year later, Fannie received a report that law firms working for Fannie had filed false documents. Instead of developing a system to monitor andcease the practice, they questionably signed –or stamped- paperwork. 

The report found no evidence that Fannie Mae made any improvements to overseeing its own attorney’s handling “robo-signed” documentation.

FHFA was created in 2008 to oversee mortgage buyers Fannie Mae and Freddie Mac. FHFA has the authority to fire and replace employees, issue cease & desist orders and impose fines. The agency has not taken any of those actions to date, the report said.

Noteworthy, today Fannie Mae and/or Freddie Mac own or guarantee about half of all U.S. mortgages, or nearly 31 million home loans worth more than $5 trillion. As part of a nationalized system, they account for nearly all new mortgage loans. So anyone looking to buy a home would be forced to pay higher rates on new loans.

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

Additionally, a separate inspector general report cited the FHFA lacks examiners to monitor Fannie. Only a third of its 120 non-executive examiners are federally accredited, the report found. 

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