Fannie Mae Knew Early of Abuses, Report Says

[Omaha Steve]

Source: NY Times

By GRETCHEN MORGENSON

Fannie Mae, the mortgage finance giant, learned as early as 2003 of extensive foreclosure abuses among the law firms it had hired to remove troubled borrowers from their homes. But the company did little to correct the firms’ practices, according to a report issued Tuesday.

Only after news reports in mid-2010 began to describe the dubious practices, like the routine filing of false pleadings in bankruptcy courts, did Fannie Mae’s overseer start to scrutinize the conduct. The report was critical of that overseer, the Federal Housing Finance Agency, and was prepared by the agency’s inspector general.

In one notable lapse, even after the agency reported problems to Fannie Mae in late 2010 about some of the approved law firms, it did not request a response from the company, the report said.

“American homeowners have been struggling with the effects of the housing finance crisis for several years, and they shouldn’t have to worry whether they will be victims of foreclosure abuse,” said Steve Linick, inspector general of the finance agency. “Increased oversight by F.H.F.A. could help to prevent these abuses.”


Read more: http://www.nytimes.com/2011/10/04/business/fannie-mae-ignored-foreclosure-misdeeds-report-says.html?_r=1&partner=EXCITE&ei=5043

[Demeter]

1. But that wasn't part of the plan

You can't shear the sheep unless you are willing to nick them till they bleed...

[dkf]

2. The bigger problem is if they knew the loans were based on fraudulent data.

If they did, can they still send the loans back to the originators?

[naaman fletcher]

6. Yes

But that would bring down Bank of America, and the government won't let that happen.

[Igel]

11. Really?

If Freddie and Fannie knew the loans were based on fraudulent information when they accepted them, couldn't the other side persuasively argue that the Fs knew about and accepted the risks at the time and therefore can't come back years later to return the securities? Rather like buying goods you know are damaged then trying to return them a year later because, well, they were damaged when you bought them.

For some reason, the word "estoppal" comes to this non-lawyer's mind.

[No Elephants]

3. So, who will be HELD ACCOUNTABLE?

[r0nr0ntaiwan]

4. Bush

I expect no one here will find many things to praise Bush for... but back in 2003 and 2004, Bush pointed to the future problems regarding Freddie Mac and Fannie Mae. Barney Frank's reply: "Problems? What problems?" Of course, we find out later on who is partner is/was. Many Democrats opposed reigning these companies in.

Bush's main fault: While trying to do SOMETHING, he didn't highlight the potential problems to the public... i.e., he didn't show much leadership on this issue.

Then again, it's hard to convince people of impending doom. Rather, we tend to wait for it to happen, then point fingers. So, chances are his warnings would mainly have fallen on deaf ears.

[toopers]

8. Also, many people were getting rich . . .

including Barney Frank's SO who was head of Fannie May.

[avaistheone1]

9. Bush is no innocent. He was pushing for more home ownership.

Remember Bush references to the "ownership society" in his speeches?

[rfranklin]

10. Bush pushed for 5.5 million new home owners through Fannie and Freddie...

But it was actually President Bush who was the champion on May 17, 2002: "I've challenged the industry leaders all across the country to get after it for this goal, to stay focused, to make sure that we achieve a more secure America, by achieving the goal of 5.5 million new minority home owners.... First of all, government sponsored corporations that help create our mortgage system...they call those people Fannie May and Freddie Mac, as well as the federal home loan banks, will increase their commitment to minority markets by more than $440 billion."



(To see President Bush say it, go to http://www.youtube.com/watch?v=kNqQx7sjoS8)

[DCKit]

5. Co-conspirator. nt

[reformist2]

7. The problems began with the no-doc loan originations, not the foreclosures.

The government turned a blind eye toward the banks in the early 2000s, because they realized the only way to revive the economy one last time was with a once-in-a-lifetime housing bubble. Now that bubble has burst, and our fearless leaders are out of ideas.