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Fannie Mae breaks rules to foreclose on unsuspecting homeowners



Tara Steele | 2011/08/15  | 90 Comments

fannie mae wide 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.

bank of america hamp Fannie Mae breaks rules to foreclose on unsuspecting homeowners

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.

fannie mae Fannie Mae breaks rules to foreclose on unsuspecting homeowners

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.


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This article published on Monday, August 15th, 2011 at 12:18 am | Contact the editor

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Topics: News

About this Columnist (Full Profile)

Tara Steele is the News Director at AgentGenius, covering real estate news, technology news and everything in between. If you’d like to reach Tara with a question, comment, press release or hot news tip, she frequently checks her email, simply click the link below.

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  1. Gia Freer says:
    2011/08/15 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?

    Reply
  2. Missy Caulk says:
    2011/08/15 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.

    Reply
  3. Carletta Lott says:
    2011/08/15 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

    Reply
  4. Angela Huggins says:
    2011/08/15 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.

    Reply
  5. Manhattan Beach Realtor says:
    2011/08/15 at 9:14 am

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

    Reply
  6. Thomas A B Johnson says:
    2011/08/15 at 9:24 am

    Socialists must grab all the private property. Next question.

    Reply
  7. Ben Fisher says:
    2011/08/15 at 9:41 am

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

    Reply
  8. Paula Henry says:
    2011/08/15 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.

    Reply
  9. Greg Cook says:
    2011/08/15 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.

    Reply
  10. Robin Graham says:
    2011/08/15 at 6:31 pm

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

    Reply
  11. Jeff Vaught says:
    2011/08/16 at 12:51 pm

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

    Reply
  12. Robert Walker says:
    2011/08/20 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…

    Reply

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