The Federal Housing Finance Agency, the regulator overseeing mortgage finance giants Fannie Mae and Freddie Mac, has missed multiple opportunities to investigate and stop abusive practices by law firms that were foreclosing on homeowners on behalf of Fannie, according to its inspector general.
The report says that since 2003, the regulator has known about problems with the law firms employed by Fannie, but did not launch probes until last year. Last fall, a national scandal erupted when law firms employed by Fannie and Freddie were found to have fabricated documents and violated the legal rights of homeowners facing foreclosures.
In one case, Fannie decided to retain a problematic firm because it “determined that the cost of transferring its files from the firm to a replacement vendor would be substantial.”
FHFA told its inspector general that it agrees it should review its policy and is conducting its own review of the law firms.