Report shows Fannie Mae ignored loan paper work abuse by lenders

A recent report from the inspector general of the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, said Fannie Mae waited two years before acting on a tip from one of its shareholders about abuses by lawyers handling foreclosures. The report analyzed the practices of outside law firms hired by the government-sponsored lenders to handle mortgage defaults.

According to Bloomberg, the report said Fannie Mae did not act on an allegation from a shareholder in December 2003 until a new law firm was hired two years later. The law firm reported in May 2006 that the attorneys in question were filing false paperwork associated with foreclosures, and Fannie Mae did not notify its regulator of the findings after the report.

The news source reported the inspector's report was in response to a request from Representative Elijah Cummings of Maryland to further investigate if banks and lenders were using false documents and signatures to justify foreclosures in the beginning of the housing crisis in 2008.

The New York Times reported that this report is the second in two weeks from the inspector general that has found fault in both the Federal Housing Finance Agency as well as the companies it oversees. The new report tracks dealings between Fannie Mae and law firms handling foreclosures dating back to 1997, when the lender devised a legal network to ensure borrower defaults were handled quickly and efficiently.

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