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Friday, October 07, 2011

Fannie Mae ignored robo-signing abuses in Florida foreclosures, investigation finds


By
 KIMBERLY MILLER

Palm Beach Post Staff Writer
Updated: 9:39 p.m. Friday, Sept. 23, 2011
Posted: 9:37 p.m. Friday, Sept. 23, 2011

Federal mortgage giant Fannie Mae was told in 2006 about faulty court documents filed by Florida foreclosure attorneys acting on its behalf but did nothing to correct the practices, an inspector general found.
A report issued Friday by the Federal Housing Finance Agency Office of Inspector General said an outside law firm Fannie Mae hired to investigate allegations of wrongdoing confirmed "unlawful" practices and stated that foreclosure attorneys were sacrificing accuracy for speed by filing false documents.
After learning of the attorney misconduct in 2006, Fannie Mae failed to make any improvements in its oversight of the firms.
"Strengthened law firm oversight by Fannie Mae could have detected - if not prevented - these abuses by attorneys," the report said.
Florida foreclosure defense attorneys agreed, pointing to the morass that followed last fall's revelation of robo-signed documents and other faulty paperwork, some of which was produced by Florida's so-called foreclosure mills.
"If action were taken sooner, we would have avoided a lot of this instead of muddying up the public land records in tens of thousands of cases," said attorney Tom Ice of Ice Legal in Royal Palm Beach. "It goes without saying that if someone did something to stop the fraud, it would have benefited everyone."
Fannie and Freddie Mac buy loans from banks and sell them to investors, providing guarantees to cover losses when loans default. They were taken over by the government in 2008.
The Plantation-based firm of David J. Stern is not mentioned in the 30-page report released Friday, but it was Fannie Mae's largest retained law firm in Florida.
Fannie Mae fired the firm in November after former employees told state investigators that signatures on notarized documents were regularly forged, notary stamps were passed around and used by non-notaries, assignments of mortgages were created after foreclosure judgments were entered, and flawed files were hidden from federal auditors.
Stern subsequently laid off hundreds of employees and closed his foreclosure practice in March. An estimated 100,000 former Stern cases were left in limbo, including nearly 9,000 in Palm Beach County, as they were transferred to new law firms and reviewed to see whether they could move forward as is or they needed new paperwork.
Fannie Mae also fired the Fort Lauderdale-based firm Ben-Ezra & Katz in February.
The firm acknowledged finding "technical paperwork issues" with its foreclosure files but said "there is no issue of whether the information in the affected files is correct."
As of June 30, Fannie Mae had a $180 billion unpaid home loan principal balance in Florida. About 12 percent of the state's Fannie Mae loans are delinquent.
Friday's report also noted that Federal Housing Finance Agency officials told the inspector general they were unaware of the 2006 report until it was disclosed in a March 2011 "magazine article." The Wall Street Journal published an article in late March about the report.
Fannie Mae declined to comment, but the Federal Housing Finance Agency disputed some of the inspector general's findings, including that foreclosure abuses in Florida and elsewhere "illustrate the negative consequences" of Fannie Mae's oversight failures.

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