Housing News

Fannie Mae breaks rules to foreclose on unsuspecting homeowners

Fannie Mae’s current role

This spring, we reported that eight bills had been introduced to wind down Fannie Mae and Freddie Mac while a bill was introduced this summer to merge the two government sponsored entities that together own or guarantee the majority of home loans in America.

President Obama himself has said that housing is the biggest drag on the economy but has not quite admitted the colossal failure that is the Housing Affordable Modification Program (HAMP) which is well known for spending taxpayer money with little return- few homeowners have actually received a modification, most end up in limbo and there are even claims of lost paperwork and stall tactics from servicers unwilling to properly execute the program. On top of the internal drama, the House approved cuts to the HAMP program, potentially ending the taxpayer involvement in the long run.

Fannie Mae has publicly proclaimed they will protect consumers while in the process of applying for HAMP or other federally funded loan modification programs.

Fannie Mae’s blatant rule breaking

Confidential records obtained by The Detroit Free Press reveal that Fannie Mae has gone against that promise by violating the government’s own rules to protect homeowners in process of applying for federally funded loan modifications. Banks were directed to foreclose on mortgages over 12 months delinquent, despite loan modification status. Free Press notes that other confidential documents they have obtained show “that Fannie Mae made clear to banks that Fannie expected a certain percentage of delinquent borrowers to lose their homes.”

The Free Press “obtained copies of more than 2,300 requests from various banks asking Fannie Mae for permission to delay foreclosure sales. These excerpts show two requests from Bank of America and Fannie Mae’s response, which reveals a directive to deny postponements when borrowers are more than 12 months delinquent, even when homeowners are negotiating loan modifications.”

Click to enlarge.

Fannie Mae spent $27,000 on a $3,000 debt

Fannie Mae has admitted in a confidential internal memo also obtained by The Free Press that they are willing to go to extreme lengths to foreclose on a home, in one case spending $27,000 to foreclose on a $3,000 debt.

To top it all off, Fannie Mae has warned lenders of the possibility “fining lenders for unauthorized foreclosure delays,” The Free Press notes.

Disastrous results

Homeowners are making decisions about their future based on rules that govern their protection during applying for a home loan modification through the government, which in itself is already an extremely daunting and nearly impossible task given HAMP’s horrific track record.

The housing sector continues to hemorrhage and any impediment to recover must be dealt with, but it is unclear how to deal with this monstrosity given that Capitol Hill is inconsistent with the future of Fannie specifically but inconsistent with housing regulation in general.

92 Comments

92 Comments

  1. Gia Freer

    August 15, 2011 at 6:34 am

    Great article…if Fannie Mae is going to start "fining lenders for unauthorized foreclosure delays", then who is going to be fining Fannie Mae for breaking the rules on these unsuspecting homeowners? This article references HAMP but if the homeowner decides to short sell the home because they were denied via the HAMP program, I wonder what position Fannie Mae takes then…do they still foreclose with a legitimate offer on the table for a short sale?

  2. Missy Caulk

    August 15, 2011 at 6:46 am

    I had just finished reading the entire article in the FREEP, this AM.
    Wow, all I can say is WOW.
    Everyone should take a few minutes and read the entire article. Interesting "no comment" by the big guys.
    This is tragic! Why come out and boldly say they are working with homeowners when they are NOT.

  3. Carletta Lott

    August 15, 2011 at 7:30 am

    I do feel for the borrowers, but being in Servicing, I understand the other side. While the mortgagor may not have the funds, working on a trial mod, or just delaying in providing the documentation, lenders & servicers are picking up the tab. Someone has to pay the taxes, monthly inspections (FNMA/FHLMC sets requirements), property preservation, interests, and other ancillary fees. Many lenders are being forced to close their doors, because they have to pay these funds and are reimbursed once the property forecloses. The more money that has to be spent to maintain the property, not to mention the funds that are paid on non agency loans, where the funds are due to the investors on a monthly basis, whether it's PI or PITI which fuels trusts loans. Just as with the auto and other industries. On the other hand, depending on the state, a foreclosure could take anywhere from 2 months to 19 months. It is the lenders and servicers who pay the attorney fees. So in the end, the only people who survive and make the actual profit are the attorneys. Some waive fees and costs to help the situation, but there are those that milk these situations. No one wants to foreclose, but intil a system is in place to help the borrowers, these delays just prolong the inevitable. For many, the borrowers who quality or find assistance jump in get the help and move forward, but what about the borrowers who have no money to quality for anything. What is looked it is this… If we can help them temporarily, can they keep up on their own in the future… More jobs are needed along with other governmental changes. This is just my thought

  4. Angela Huggins

    August 15, 2011 at 9:14 am

    Ridiculous! How are these companies able to continue to do this? Really, haven't homeowners had enough of a beating with the market. Now, the companeis that are supposed to be working with them are targeting them directly. This is just insane.

  5. Manhattan Beach Realtor

    August 15, 2011 at 9:14 am

    And before you know it, the government will be the biggest landlord in town…

    • Randy Pereira

      August 15, 2011 at 12:51 pm

      Exactly! That is the issue I'm waiting to see addressed by NAR…

  6. Thomas A B Johnson

    August 15, 2011 at 9:24 am

    Socialists must grab all the private property. Next question.

  7. Ben Fisher

    August 15, 2011 at 9:41 am

    This has been going on for years with no end in sight. Looks like it is still happening…

  8. Paula Henry

    August 15, 2011 at 10:06 am

    Amazing that the government can continue to offer hope, while using such tactics to stop hope in it's tracks and further their own agenda.

  9. Greg Cook

    August 15, 2011 at 5:19 pm

    And now Fannie is being asked to purchase half of BofA's servicing portfolio?
    This kind of thing won't be news anymore.

  10. Robin Graham

    August 15, 2011 at 6:31 pm

    And who did NOT see this coming??? It has been writing on the wall for a very long time!

  11. Jeff Vaught

    August 16, 2011 at 12:51 pm

    Just another example of a total lack of leadership in Washington, starting at the Whitehouse.

  12. Robert Walker

    August 20, 2011 at 11:27 pm

    I blame the demonrats and the repugnicans for this mess. DC is so against the property owner it is so sad. Does not matter who is in the white house or congress as this always goes on…

  13. hirstdana

    December 13, 2012 at 4:25 am

    I was at the very tail-end of a short sale (HAFA) and Fannie Mae denied my foreclosure postponement on THE DAY OF foreclosure. I had a buyer, B of A agreed to their offer…everything. Then my realtor called Fannie Mae and asked why it was denied, they told him that I am too many months behind on my mortgage. I am 9 months behind. I thought they said they wouldn’t postpone homeowners over 12 months delinguient… I tried everything to avoid foreclosure that I could. Fannie Mae didn’t even give me a chance. However, the rep came by 2 days after foreclosure and was EAGER to offer $2,000.00 cash for keys…which is another example of misuse of tax dollars by a CORRUPT ORGANIZATION!!!!

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