Fannie Mae and Freddie Mac improperly foreclosed on homeowners and cost the government billions of dollars by failing to hold major banks to strict lending requirements, according to a semi-annual report by a government watchdog group. The Federal Housing Finance Agency also gave “undue deference” to Fannie and Freddie officials and didn’t question giant bonuses granted to the mortgage giants’ executives, the inspector general said.
The report says that Fannie and Freddie did not force banks to repurchase mortgages when they did not satisfy strict underwriting requirements and knew about allegations of improper foreclosure practices as far back as 2003 but did not act to prevent them. The agencies also allegedly failed to oversee the government’s signature foreclosure-prevention program, the Home Affordable Modification Program. [AP via Salon]