Holy crap. Talk about a bombshell!

Read the report below. There can be NO settlement with this now out in the open!

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Confidential Report to Fannie Mae Regarding Shareholder Complaint of by Mr. Nye Lavalle

EXECUTIVE SUMMARY

The Office of Corporate Justice has retained Baker & Hostetler LLP to conduct an independent investigation of concerns expressed by Mr. Nye Lavalle, a Fannie Mae shareholder, about several Fannie Mae business practices in connection with single-family mortgages. 1 Mr. Lavalle accuses Fannie Mae of “aiding, abetting and sanctioning … predatory lending and servicing schemes,” as well as committing accounting and securities fraud, and racketeering violations. He views Fannie Mae as responsible for damage inflicted on single-family borrowers by unscrupulous lenders and servicers because Fannie Mae approves lenders and servicers, maintains servicer profiles and ratings, approves mortgage document terms and servicing requirements, and benefits from the income stream created by wrongdoing. He fears Fannie Mae’s alleged failures could result in both civil and criminal liability that would affect shareholder value.

Through a series of communications to members of the Board of Directors and others starting in December 2003, Mr. Lavalle called for an independent investigation of his allegations? The Board of Directors decided to conduct an internal review of these concerns. On September 12,2005, the Office of Corporate Justice retained Baker & Hostetler LLP.

Mr. Lavalle began investigating the mortgage industry after his parents, Anthony and Matilde L. Pew, had a dispute with mortgage servicer EMC Mortgage Corporation (“EMC”), a subsidiary of Bear Stearns Companies (“Bear Stearns,,).3 EMC ultimately foreclosed on the Pews’ property, even though, according to Mr. Lavalle, his family is wealthy and made repeated efforts to repay the loan.4 The dispute motivated Mr. Lavalle to investigate and publicize his allegations that EMC engaged in predatory servicing practices, which has resulted in several lawsuits between Bear Stearns and Mr. Lavalle.5 Mr. Lavalle then broadened his focus to include the single-family mortgage industry as a whole.

Mr. Lavalle considers himself a gadfly of the mortgage industry. He claims to have been investigating, analyzing and exposing mortgage fraud, predatory lending and servicing, and securitization schemes since 1993.6 He has a website that details his complaints, and has posted information on several other sites.7 He claims to have spent more than 20,000 hours and nearly $500,000 investigating predatory lending and servicing.8 He reports that he is a consultant to plaintiff lawyers who sue lenders and servicers and to homeowners.

Mr. Lavalle’s view is that since Fannie Mae is such an important force in the mortgage industry, it has both the responsibility and means to end abusive lending and servicing practices. Mr. Lavalle’s view is that Fannie Mae directs the conduct of servicers from afar. In an e-mail ofFebruary21.2006.Mr. Lavalle expresses his frustration, saying:

I hate to keep using the analogies that you don’t like but it really is like a Mafia operation. The Godfather [Fannie Mae] says we got a problem, “take care of it” and the lieutenant [“the servicer”] orders the hit [foreclosure] and hires the hitman [the USFN or other lawyer to foreclose].

The hit man and lieutenant don’t want the Godfather implicated so they create layers of deniability [a typical CIA, white house, legal and political maneuver] to conceal who the real parties in interest are and who had knowledge of and ordered the hit.

While Mr. Lavalle is partial to extreme analogies that undermine his credibility, he has become knowledgeable about the mortgage industry. He has identified significant issues but, in our view, does not always analyze them correctly. In proposing solutions, he generally undervalues the benefits to homeowners of efficient mortgage markets operated at low costs and overstates the needs of borrowers to have information about the status of their loans in the secondary markets for mortgages. Fannie Mae has already identified and is addressing many of the same issues. This report details several areas where Fannie Mae faces legal and business issues that remain to be addressed. Mr. Lavalle also claims that as a result of this work, he and his family have been harassed. He expresses considerable anger when he attributes these attacks to Fannie Mae. An investigation of his personal retaliation claim is in progress; to date Mr. Lavalle has identified no direct conduct by Fannie Mae that he considers harassing.

We have reviewed more than 1,500 pages of documents provided by Mr. Lavalle to Fannie Mae or us directly and had 17 conversations with him. We have identified six general areas of his concerns: (1) foreclosure policies and procedures, (2) transparency, (3) protection of promissory notes, (4) predatory servicing, (5) fraud detection and reporting, and (6) accounting and securities issues. Within each area, Mr. Lavalle identifies multiple issues that are detailed in this report. In investigating these concerns, we have collected documents from Mr. Lavalle, Fannie Mae and public sources, reviewed extensively eFannie.com, and interviewed at least 30 Fannie Mae employees. The company has fully cooperated in our investigation.

In reviewing Mr. Lavalle’s concerns as a shareholder, we have told Mr. Lavalle that the proper scope of our investigation is to determine whether he has identified wrongdoing hy Fannie Mae officials or financial risks of sufficient magnitude to affect materially Fannie Mae’s financial statements. We cannot resolve every case of an alleged mishandled mortgage.

Full report below…

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4closureFraud.org

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Confidential Report to Fannie Mae Regarding Shareholder Complaint of by Mr. Nye Lavalle