Fannie Mae knew as far back as 2003 that various law firms the agency had hired to foreclose on homes were abusing authority according to a new report from the Federal Housing Finance Agency (FHFA) inspector general, the same office that discovered Fannie Mae and Freddie Mac executives were awarded giant salaries in recent years without proper written procedures or analysis.
The most recent report filed claims that the FHFA failed to oversee Fannie Mae and Freddie Mac with the report claiming Fannie Mae did not stop attorneys from filing false pleadings in foreclosure actions in bankruptcy court, according to the New York Times. When the FHFA discovered that Fannie Mae was aware of and allowing this behavior, they addressed them directly with Fannie Mae but failed to force a response, and the issue when untouched for several years, an error the FHFA inspector general says if the fault of the FHFA.
The law firms that were filing false pleadings allegedly did so because they were paid by the number of foreclosures they executed, and the attorneys used “unethical means” to increase their numbers. The ultimate problem is that the law firms were required to self police and there was little to no oversight until the FHFA probe began.
The report notes that by September 29, 2012, it would review its existing supervisory practices and take action to prevent future foreclosure abuses due to “deficiencies in the management of risks associated with default-related legal services vendors.”