A troubled Fannie Mae
Four Fannie Mae staff members have been placed on administrative leave pending a federal investigation by the Federal Housing Finance Agency (FHFA) Inspector General who is focused on “a transaction involving distressed debt on multifamily property,” according to the Wall Street Journal.
After several voluntary meetings with law enforcement officials, reports claim that federal law enforcement officials arrived unannounced at several Fannie Mae employees’ homes at the end of last week, but it is unclear as to whether or not the officials executed search warrants, but some suspect that they did.
Four of the employees have now been placed on administrative leave during the investigation of a series of apartments that were foreclosed upon and sold by the agency. Full details have not been made available by the agency, but WSJ had information on a single transaction wherein Fannie Mae’s bulk sale of a foreclosed apartment was sold to a prominent New York developer.
“The investigation is limited in scope and we are cooperating fully with FHFA and the OIG [Office of the Inspector General],” a Fannie Mae spokesperson told WSJ. “Consistent with our usual practice, we placed employees on administrative leave pending the outcome of the review.”
The changing tides and what they indicate
The FHFA who oversees Fannie Mae and Freddie Mac has recently taken action to shape the practices of Fannie Mae and Freddie Mac, including dismantling their lawyer network which has been used to process foreclosure filings. These are the same law firms that a recent Federal Housing Finance Agency (FHFA) report says falsified foreclosure filings to pump up their stats of foreclosures completed (thus getting paid more), abuses which were known since 2003 by Fannie Mae and Freddie Mac. Freddie Mac fired the firms, while Fannie Mae said it would cost $5 million to transfer the files to another firm, they couldn’t afford to do so, and they refused, leading to the FHFA dismantling the entire network.
The tides are changing ever so slightly at Fannie and Freddie and we predict major in-fighting in coming months, as fingers wag and point and politicians make plans to do more than dismantle the lawyer network, many have been trying to dismantle Fannie and Freddie altogether. While none of this fixes the abuses that have taken place on all levels, the FHFA’s persistence could prove to turn over stones that Fannie and Freddie would likely have preferred stay unturned.