A new report by the Federal Housing Finance Agency's (FHFA) Office of the Inspector General has determined that Fannie Mae executives knew about problems with the law firms it employed as early as 2003, but only began investigating the problems last year after media reports surfaced of dubious foreclosure-related practices involving these law firms.
According to media sources that previewed the report, Fannie Mae's leadership balked at firing one law firm because it ‘determined that the cost of transferring its files from the firm to a replacement vendor would be substantial.’ The report also faulted the FHFA for not taking a more aggressive approach toward the matter.
The report traces Fannie Mae's business relations with the law firms since 1997, when the government-sponsored enterprise started employing private law firms to handle its foreclosures. After being informed of problems in 2003, Fannie Mae assigned an outside counsel to investigate the matter. Three years later, the counsel determined that Fannie Mae's ‘foreclosure attorneys in Florida are routinely filing false pleadings and affidavits.’
The new report was uncertain if Fannie Mae ever alerted its regulator, the Office of Federal Housing Enterprise Oversight, to the problems created by its law firms. A Fannie Mae spokesperson declined to comment on the report, which is scheduled for release later today.