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Fannie Mae and Freddie Mac Dump Their Foreclosure Barons--for Good

Business  (tags: abuse, americans, business, consumers, corporate, corruption, cover-up, dishonesty, economy, ethics, finance, foreclosures, government, investments, lies, marketing, money, society )

- 1757 days ago -
Most notably, Fannie and Freddie's regulator announced (PDF) on Tuesday that the twins would soon shut down their network of high-powered foreclosure law firms around the country.

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Kit B (276)
Friday August 2, 2013, 5:15 am
Photo Credit: respres/Flickr

It's been a while since Fannie Mae and Freddie Mac, the twin housing corporations wrongly blamed for triggering the subprime mortgage meltdown and now essentially owned by American taxpayers, made headlines. But don't be fooled: Change is underway at Fannie and Freddie in the wake of the financial crisis.

Most notably, Fannie and Freddie's regulator announced (PDF) on Tuesday that the twins would soon shut down their network of high-powered foreclosure law firms around the country. These firms, paid to process foreclosures as fast and cheaply as possible, ran into trouble in recent years when some of these outfits were found to have backdated key legal documents and falsified signatures on affidavits. One of the largest "foreclosure mills" working for Fannie and Freddie was the now-defunct Law Offices of David J. Stern based in Fort Lauderdale, Florida, whose questionable practices Mother Jones exposed last August.

As it happens, that MoJo expose is cited multiple times (as are other key stories) in the inspector general's report released in late September that likely spurred Fannie and Freddie to ditch their foreclosure firms. Written by the inspector general for the Federal Housing Finance Agency (FHFA), which oversees Fannie and Freddie, the report's authors found that Fannie knew of foreclosure abuse allegations against its attorneys as early as 2003—complaints that only mounted over the next seven years. But Fannie and the FHFA repeatedly failed to deal with the alleged abuses cropping up until criticism of the foreclosure mills reached a fever pitch in the fall of 2010. And even then, when the FHFA investigated the allegations and later sent a list of identified problems to Fannie, the regulator never followed up to see if any changes occurred, the IG report says.

The loss of Fannie and Freddie's business will hit foreclosure firms hard. In the case of David J. Stern's firm, the twins were a cash cow, especially when the number of foreclosures spiked after the housing bubble burst. In depositions, former employees said Stern referred to Fannie and Freddie as "his babies." But Stern's falling out with Fannie and Freddie arrived well before this latest news. Last fall, both companies stopped doing business with him in light of fraud allegations, news stories revealing a slew of improprieties at the firm, and an investigation by the Florida attorney general's office. At the time, a Freddie spokesman said the cases handled by Stern would be moved to other firms "so they can be completed in compliance with state law."

That said, for the foreclosure firms still in business, they might not be completely out of luck. The FHFA's latest announcement said that instead of Fannie and Freddie using a stable of foreclosure attorneys, mortgage servicers would pick their own firms. As Mother Jones has reported, servicers have their fair share of problems, too. Time will tell if the FHFA's reforms make any difference in Foreclosureland.

By: Andy Kroll | Mother Jones |

Bryna Pizzo (139)
Friday August 2, 2013, 9:19 am
Thank you for the news! I hope the rotters who broke the law will be prosecuted; however, I fear it is unlikely.

JL A (281)
Friday August 2, 2013, 9:46 am
Perhaps now that the appointee blockade has been broken in the Senate POTUS will find someone big enough and ethical enough to spearhead cleanup?

Carrie B (306)
Friday August 2, 2013, 9:50 am
We can only hope. Thanks Kit.

SuSanne P (193)
Friday August 2, 2013, 12:44 pm
ThankX Kit. More Stars to JL A and Carrie who always sums it up. "We can only hope". Bryna-YOU TOO!

Kathleen R (138)
Friday August 2, 2013, 12:56 pm
noted & read

Birgit W (160)
Friday August 2, 2013, 1:12 pm

Alice C (1797)
Friday August 2, 2013, 3:00 pm
Lets hope that this is true ~ noted ~ Thanks Kit : )

Dianna M (16)
Friday August 2, 2013, 3:51 pm
". . . will soon close down . . . " Huh. Not soon enough, if you ask me.

It's goodbye, darling.
Your turn to cry.
And you know good and well why, darling.
Why you got the gong.
I was into you to long. . . .
Plop plop, fizz fizz, oh what a relief it is."--Bette Midler, 'Yellow Beach Umbrella'

Sheila D (194)
Friday August 2, 2013, 4:29 pm
Imagine that - Fannie and Freddie fraud...hard to what will all those cheaters do??
Noted with thanks.

Winn Adams (179)
Saturday August 3, 2013, 6:46 am

Craig Pittman (52)
Sunday August 4, 2013, 5:17 am
It's a good start. Let's hope Fannie and Freddie expand and continue on this road of due diligence. It's yet another indication that oversight and regulations most certainly are required. Just look at what the "money people" did to our economy when they were given free reign.
Good story, thanks Kit.
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