Fannie Mae recognizes that foreclosure abuse is an operational risk. As it noted in its 2010 Securities and Exchange Commission 10-K filing,  2006 Report to Fannie Mae of Foreclosure Abuses in Florida.

In December of 2003, a Fannie Mae shareholder {ME}”began” alerting Fannie Mae to foreclosure abuse allegations, and in 2005 Fannie Mae hired an outside law firm to investigate a variety of allegations regarding purported foreclosure processing abuses. In May 2006, the law firm issued a report of investigation in which it found that:

[F]oreclosure attorneys in Florida are routinely filing false pleadings and affidavits…. The practice could be occurring elsewhere. It is axiomatic that the practice is improper and should be stopped. Fannie Mae has not authorized this unlawful conduct.

Further, the report observed that Fannie Mae did not take steps to ensure the quality of its foreclosure attorneys’ conduct, the legal positions taken in the attorneys’ pleadings, or the manner in which the attorneys processed foreclosures on the Enterprise’s behalf.

FHFA-OIG could not establish whether Fannie Mae complied with its obligation to notify OFHEO of the 2006 report of foreclosure abuses. Fannie Mae officials claim that they informed an OFHEO senior official of the report during a telephone conversation in 2006, but they have no record of the communication. The OFHEO official, who now works for FHFA, has no records or recollection of the conversation.

Federal Housing Finance Agency Office of Inspector General • AUD-2011-004 • September 30, 2011 the failure of our servicers or a law firm to apply prudent and effective process controls and to comply with legal and other requirements in the foreclosure process poses operational, reputational and legal risks for us.”18 Yet, there is
little evidence that Fannie Mae disclosed allegations of foreclosure abuse to its regulator.

Full report below…

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4closureFraud.org

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FHFA’s Oversight of Fannie Mae’s Default-Related Legal Services