Officials angered over Fannie Mae disclosures

Michigan leaders in the fight against the foreclosure crisis reacted strongly Sunday to revelations that mortgage giant Fannie Mae appears to have been pushing banks to foreclose on homeowners rather than continue negotiating loan modifications.

The story broke in the Detroit Free Press, which reported it had been given some 2,300 internal records and memos from Fannie Mae. Those documents included indications that lenders should proceed to foreclosure sales rather than allow any time for modifications, and memos which indicate the company was threatening to charge a penalty to lenders who allowed foreclosures to wait too long before they were executed.

Particularly troubling was the fact that these memos came at the same time that Fannie Mae officials were testifying before Congress that they were doing everything in their power to prevent foreclosures.

“I am thoroughly disgusted by the actions of Fannie Mae,” said Ingham County Register of Deeds Curtis Hertel, who is currently suing Fannie Mae and other lenders arguing that they failed to pay Ingham county millions of dollars in title transfer taxes. “What these internal documents show is that while Fannie Mae was being bailed out by taxpayers they were systematically pushing for citizens to be foreclosed. The reason for this is even worse. Right now we as taxpayers pick up the cost of every foreclosure, because we pay Fannie Mae’s loss in the foreclosure process. In other words they actually get paid more for a foreclosure than for a reasonable modification.”

Neeta Delaney, co-director of the Michigan Foreclosure Task Force, had a slightly more muted response.

“We see this on a daily basis. It is what we have been characterizing as the right hand not knowing what the left hand was doing,” she said. Her coalition represents nearly 200 groups with a stake in ending the foreclosure crisis and is working to push new foreclosure related legislation through the legislature. “It’s not new news (foreclosures during modification negotiations). But the documents are new news. These documents are implying a policy behind this. It’s not just the banks being overwhelmed.”

Steve Dibert, a mortgage fraud investigator who owns the company MFI-Miami, said there was little surprise in the new revelations.

“Like everything else that has come out of Washington since the crash, this double talk is nothing new from Fannie Mae,” Dibert said. “They’ve been doing it for years. Mortgage servicers and banks have also been doing this for years. Contrary to what was pitched to Congress and the American people, HAMP was not designed to help homeowners. It was done to essentially take the 5 million plus mortgages that were slated to default in April of 2009 and spread them over a two to three year period. The banks feared that had this number of mortgages gone into default all at once it would have collapsed the US banking system.”

The documents also may impact all foreclosures. Dibert notes that those documents appear to indicate an ownership of the mortgages.

“If Fannie Mae is claiming ownership of these mortgage at the time of the foreclosure then why is ownership being assigned to the the servicer (usually through MERS) prior to the sheriff’s sale?” Dibert said. “Under Michigan law, if the servicer forecloses they must disclose who the owner of the note is.”

The result of this, Dibert has noted in the past, could be the elimination of thousands of foreclosures because the law was not followed properly.

While Hertel would not discuss particulars in how these new documents and revelations might impact his ongoing lawsuit against the mortgage giant.

“It shows a direct willingness of Fannie Mae to lie to Congress and the American people,” Hertel said. “It also shows the incestuous relationship that Fannie Mae has with the major national banks. Finally, Fannie Mae claims tax exemptions saying they are part of the federal government. I am pretty sure this shows that Fannie Mae’s interest is in profits and not the public good or the goals of the federal government. This is further proven by their CEO’s almost $5 million dollar salary.”

Ultimately, however the disclosures shake out, Delaney says she knows who will lose.

“The upshot,” she said, “is that, no matter what, the homeowners lose.”