When home prices were still booming earlier this decade, the foreclosure scandals that dominate the headlines today could have been averted had Fannie Mae paid more attention to one foreclosed homeowner, according to the New York Times.
Nye Lavalle, a well-to-do business professional, was preparing to pay off the $100,000 balance in 1988 on a loan he took out for a home in Dallas, Texas. But Lavalle found discrepancies in the paperwork that inflated his bill by $18,000. He refused to pay his loan servicer, and endured a long, and ultimately unsuccessful, legal process to fight the charges. In 1995 he lost the home.
For years Lavalle conducted his own personal investigation into the mortgage industry. In 1996 he found forged signatures on foreclosure documents, and over the next seven years found more instances of improper foreclosure filings initiated by the Mortgage Electric Registration.
In fact, Lavalle found that Fannie only kept about 40 percent of notes once mortgages were paid off. If a paid off note was held by another lender, it could, and in some cases did, demand money from the homeowner, even though he or she already repaid the entire loan.
Starting in 2003, Lavalle revealed his findings to Fannie Mae and held dialogues with officials for more than two years on the unlawful ways they were carrying out foreclosures. In 2006, still years before foreclosures claimed the spotlight, a law firm hired by Fannie to investigate Lavalle’s claims issued their own report that largely ccorroborated his findings.
But, according to the Times, that “is where it ended.” It appears Fannie Mae management never took action from the report, which could have preempted the troubles it’s saddled with today. [NYT]