Fannie Mae was warned in a 2006 internal report of abuses in the way lenders and their law firms handled foreclosures, long before regulators launched investigations into the mortgage industry’s practices.
The report said foreclosure attorneys in Florida had “routinely made” false statements in court in an effort to more quickly process foreclosures and raised questions about whether some mortgage servicers or another entity had the legal standing to foreclose.
The report found no evidence that borrowers were improperly placed in foreclosure.
“Fannie Mae took the necessary steps to address the specific issues identified by the 2006 report and regularly evaluates and enhances oversight of its retained attorney network,” said a Fannie Mae spokeswoman.
The government-controlled agency is the largest U.S. mortgage investor by amount of mortgages guaranteed. Fannie and Freddie Mac buy loans from banks and sell them to investors, providing guarantees to cover losses when loans default. They largely are reliant on banks and other firms to service those loans or to handle day-to-day management, including foreclosure. The firms were taken over by the government in 2008 as loan losses soared and have cost taxpayers $134 billion.
In recent months, federal and state officials have initiated probes into whether banks and foreclosure law firms improperly seized homes by using fraudulent or incomplete paperwork. Some U.S. banks temporarily froze foreclosures to review their processes and now face the prospect of a multibillion-dollar settlement with federal and state officials. Fannie Mae severed ties with two Florida law firms in the past six months due to concerns about how the firms pursued foreclosures in Florida courts.
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