Not only were the law firms hired by Fannie Mae and Freddie Mac to process foreclosures found to be negligent, but the government agencies’ reviews of those firms also went ignored, according to a Federal Housing Finance Agency watchdog report obtained by the Wall Street Journal.
Last September, banks suspended foreclosures after many foreclosure lawyers were found to be “robo-signing” documents without dedicating enough time to work through all the necessary information and documentation to verify their legitimacy. Many of those lawyers were hired by Fannie Mae to handle foreclosures on mortgages backed by Fannie Mae and Freddie Mac.
But three months earlier, in June, the Federal Housing Finance Agency conducted an inspection of several Florida law firms handling federally backed mortgage foreclosures and caught wind of the problem. But Fannie didn’t react to the findings.
The FHFA, which recently found staffing problems of its own, said that Fannie Mae could have, and should have, reacted sooner to the foreclosure problems. By some measures, Fannie should have been aware of a potential problem even earlier.
In 2003 shareholders notified the company of possible abuses relating to foreclosures, and a 2006 review found foreclosure attorneys working in Florida “routinely” made false statements in court to speed up the process. [WSJ]