Friday, March 25, 2011

Fannie Report Warned of Foreclosure Problems in 2006

Fannie Mae was warned in a 2006 internal report of abuses in the way lenders and their law firms handled foreclosures long before regulators launched investigations into the mortgage industry's practices, The Wall Street Journal reported today. The report said foreclosure attorneys in Florida had "routinely made" false statements in court in an effort to more quickly process foreclosures and raised questions about whether some mortgage servicers or another entity had the legal standing to foreclose. The report found no evidence that borrowers were improperly placed in foreclosure. State and federal officials are seeking to establish new rules for the industry. The report could add ammunition to those calling for stronger regulation of mortgage servicers. Elizabeth Warren, the White House adviser in charge of establishing the new Bureau of Consumer Financial Protection, said in congressional testimony last week that with proper oversight, "the problems in mortgage servicing would have been exposed early and fixed while they were still small." Fannie Mae hired Baker & Hostetler LLP to investigate potential mortgage-servicing abuses after a Fannie shareholder raised concerns to Fannie five years ago about the industry's practices. The report raised red flags that have roiled the industry, including improper legal filings by foreclosure attorneys and questionable practices surrounding the Mortgage Electronic Registration Systems.