Watchdog Says Fannie Mae Delayed Action on Loan Paperwork Abuse

October 04 00:00 2011

New York, October 4 ( – A government watchdog has reported that Fannie Mae delayed taking action by two years on a tip off from one of the shareholders regarding abuses committed by lawyers handling the mortgage firm’s foreclosures.

The government-sponsored firm had hired outside law firms to investigate mortgage defaults and a report on these firms was released by the inspector general of the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac.

It was revealed in the report that Fannie Mae failed to act on the December 2003 allegation from an unidentified shareholder until the law firm was hired two years later. The law firm had reported to Fannie Mae in 2006 that Florida-based foreclosure attorneys were “routinely filing false pleadings and affidavits.” The inspector general said that Fannie Mae did not inform its regulator about the findings. Investigations are being carried out by state attorney general and federal regulators regarding whether false documents and signatures were used by banks and mortgage servicers to justify foreclosures, which is also known as robo-signing.

The request for the inspector general’s report was at the behest of Representative Elijah Cummings of Maryland, the top Democrat on the House Oversight and Government Reform Committee. It was revealed in the inspector general’s report that FHFA failed to conduct a review of the legal vendors of Fannie Mae and Freddie Mac until late last year. This failure was termed as a “breach of the public trust” by Cummings.